The price of Bitcoin surged on Thursday following a significant drop in inflation, as indicated by a closely monitored inflation gauge in the U.S. The Consumer Price Index (CPI) reported a 2.4% increase over the past year, which was lower than the 2.6% that economists had anticipated.
Core Inflation Insights
The core inflation, which excludes volatile food and energy prices, rose to 2.8%, also falling short of expectations. This marks a notable improvement from February's 3.1% annual increase.
"This marks some good news for equities and Bitcoin," said David Hernandez, a crypto investment strategist at 21Shares. He emphasized the importance of next month's CPI report in assessing the effects of tariffs not factored into President Trump's recent trade decisions.
Market Reactions
The CPI's increase in March was significantly influenced by a rise in new vehicle prices, although this was somewhat counteracted by a decrease in used car prices. Interestingly, consumer prices saw a 0.1% decline compared to February, marking the first month-to-month drop since 2020.
Currently, the Bitcoin price is around $82,000, reflecting a 7.5% increase over the past day and a 0.2% gain in the last hour, according to CoinGecko. Both Ethereum and Solana also experienced significant gains of 11%, trading at approximately $1,600 and $114, respectively.
Impact of Tariffs
The inflation data comes on the heels of President Trump's decision to postpone tariff hikes on most countries for 90 days, offering markets immediate relief after recent trade uncertainties. Trump has adjusted the “reciprocal” tariff rate to 10% for 90 nations, while increasing tariffs on Chinese imports to 125%.
Analyst Valentin Fournier noted that the trade maneuver has provided markets with clarity, suggesting that ongoing negotiations may help maintain a positive trend in the markets.
Federal Reserve's Stance
The Federal Reserve is currently in a wait-and-see phase, observing how Trump's tariffs might influence its inflation control measures. Despite the recent CPI readings exceeding the Fed's 2% target, this marks the second consecutive month of decline in both CPI and core measures.
Edited by Stacy Elliott.
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