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Bitcoin (BTC) Crosses $30,500 Mark as Optimism Builds Around Fed Rate Hike Pause

2 mins
Updated by Geraint Price
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In Brief

  • Expectations of a pause in interest rate hikes will likely dominate news narratives in the days ahead after U.S. CPI comes in at 0.1% for March.
  • CPI for March beat analysts' expectations of 0.3%.
  • So-called core CPI, excluding food and energy, rose 0.4%, down 0.1% from February.
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The U.S. Consumer Price Index (CPI) for March rose 5% annually and 0.1% month-on-month. Market sentiment is now leaning towards the Federal Reserve (Fed) pausing rate hikes at its upcoming meeting.

The month-on-month CPI increase beat the 0.3% predicted by FactSet analysts earlier this month. At 0.1%, it is down significantly from its 0.4% increase in February.

Bitcoin and S&P 500 Futures Rise

Like February, March’s main driver of the 0.1% increase was shelter. So-called core CPI, which excludes volatile food and energy prices, rose 0.4%, down from five-tenths of a percent in February.

U.S. Consumer Price Index | Source: YCharts

Real average hourly earnings rose 0.2% from February to March, while weekly earnings fell 0.1%.

The U.S. Consumer Price Index measures incremental inflation in prices consumers pay for goods and services. The Federal Reserve (Fed) uses this number and other economic data like the Personal Consumption Expenditure Index and employment data to modulate its approach to monetary policy.

After the news broke, treasury yields fell, and the S&P 500 futures index rose. BTC crossed the $30,500 mark before consolidating at $30,271. The coin shed some of its earlier gains at press time, changing hands at about $30,062.

BTC/USD Five-Minute Price Chart | Source: TradingView

Ethereum (ETH) rose from about $1,870 to $1,896 but is still down 1.1% in the last 24 hours as traders tread water in anticipation of the network’s Shapella upgrade later today.

Ripple XRP spiked from $0.504 to $0.508 before falling back to $0.507 at press time. Cardano (ADA) increased from $0.396 to $0.405, while Dogecoin (DOGE) jumped slightly from $0.082 to $0.083.

Cautious Market Still Sees 25 Basis Point Increase 

After the announcement, the CME’s FedWatch tool adjusted the probability of a rate hike pause at the Fed’s next Open Markets Committee meeting slightly lower to 32.2%. Meanwhile, the probability of a 25 basis point increase that would take the federal funds rate to 5%-5.25% rose slightly.  

Target for Federal Funds Rate at May FOMC Meeting | Source: CME Group

This slightly bearish response is likely due to core inflation remaining stubbornly high, only dropping by 0.1% from February to March.

In addition to price data, the Fed will also consider the employment cost index, due for release later in April 2023, to measure the strength of the U.S. labor market.

Federal Reserve chair Jerome Powell said in March that a tight U.S. labor market would sustain the aggression of the central bank’s rate hikes to bring inflation down to 2%.

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here.

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...