Critical inflation data for Bitcoin after Fed forecasts

US inflation figures, which closely concern cryptocurrencies, including Bitcoin, and other markets, have been announced. The annual inflation rate came in at 2.3%, below the expected range of 2.4%. The annual core inflation, however, was in line with expectations at 2.8%.

It was reported that there is a decline in airplane ticket and hotel prices as a sign of weakening demand, which is one of the factors affecting inflation. There were also decreases in the prices of used cars, trucks, and clothing. Grocery prices fell for the first time in about a year, and at the same time, egg prices recorded their largest monthly drop since 1984.

While the prices of new cars remained stable, expectations that additional customs duties would be reflected in prices did not materialize. On the other hand, an increase in the prices of furniture and household appliances, which are largely imported, was observed.

Following the data, the rise in American treasury bonds gained momentum, and the dollar lost value. Stock markets also opened positively.

"Supports risk appetite"

Audrey Childe-Freeman, the G10 currency strategy director at Bloomberg Intelligence, commented, "The CPI data is not game-changing for G10 currencies, but the lower-than-expected April US inflation data is supporting risk appetite."

"The Fed cannot get too much of a signal from these data"

Anna Wong and Stuart Paul from Bloomberg Economics stated in their joint assessment, "We do not think the Fed will get too many signals from the April CPI report, as they should be expecting higher inflation in the coming months. According to our baseline scenario, the Fed will only make one interest rate cut this year – 25 basis points at the December meeting."

"Time to broaden the watch on Fed's data"

Citigroup economist Andrew Hollenhorst stated that the effects of customs duties were not seen in the data released today. Durham Abric from Citadel Securities also believes that these effects will be somewhat visible in the data for May and June. Abric says, "Therefore, the Fed has quite a wide timeframe to monitor upcoming data."

The Fed, which has kept interest rates in the range of 4.25 - 4.5% for the past six months, will hold its next meeting on June 18.

Traders are expecting two interest rate cuts.

Finally, traders are maintaining their forecasts that the Fed will make two interest rate cuts by the end of 2025, following inflation coming in below expectations. Additionally, the first rate cut is expected to occur in September, with an expectation of a 50 basis point reduction in interest rates by the end of the year.

Published: May 13, 2025 17:37