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.
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.
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.
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%.
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