Inflation, which increased by 0.4% in March, decreased to 0.3% in April. This statistically small seemingly small decrease is of great importance for investors and the Fed (US Federal Reserve) interest rate policy decisions in the future. Because lower inflation data increases hopes that the Fed may slow down the rate of increase in interest rates or put interest rate cuts on the table.

In addition to the general inflation data, the core CPI data, which excludes food and energy, also pleased investors. Core CPI in April was 0.3%, the same as economists’ forecasts and the March level. This is considered a positive signal as it shows that the increase in inflation is not due to temporary factors but is based on more fundamental factors.

The fact that inflation data fell below expectations had a positive impact on the cryptocurrency markets. Bitcoin (BTC) price rose more than 1% within minutes after the report was released, reaching $63,700. Inflows of spot ETFs have slowed or reversed in recent weeks. This had put the Bitcoin price under pressure on expectations that interest rates would remain high for longer. Low inflation data increased the hope that the rate of increase in interest rates might slow down, thus affecting the Bitcoin price upwards.

The steady decline in inflation in 2023 led many, including the Fed, to expect an easier monetary policy throughout 2024. However, inflation has started to rise again since the beginning of the year. This indicates that the Fed may continue to increase interest rates in the coming period and that any interest rate reduction is not on the agenda in the near future. According to market analyzes before the inflation data, the possibility of the Fed reducing interest rates in the summer months was quite low. In September, investors expected only a 50% chance of a rate cut.

The positive impact of inflation data was not limited to the cryptocurrency market. Traditional financial markets also saw low inflation and a positive reaction to economic data. Investors breathed a sigh of relief in the hope that the pace of interest rate increases might slow down. S&P 500 futures rose 0.5%. The yield of the US Treasury’s 10-year bond decreased by 7 basis points to 4.37%. While the dollar index lost 0.5% of its value, gold prices increased by 0.7%.

The fact that inflation in the USA fell below expectations is an important development for global markets. This situation may encourage investors to take more risks and may herald a positive trend in the markets in the future. However, the fight against inflation is not over yet. The steps the Fed will take in the coming period will be of critical importance for the course of the markets. A permanent decline in inflation could have positive results in the long term for both the cryptocurrency market and traditional financial markets. This can also accelerate the integration of cryptocurrencies with traditional finance, making the cryptocurrency ecosystem more reliable and stable.