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U.S inflation rate drops to 4.9% in April—What it means for the crypto market

TL;DR

  • The U.S. inflation rate falls to 4.9% in April, lower than expected.
  • Fed may adopt a cooler outlook, possibly pausing interest rate hikes.
  • The crypto market could see positive price action in response to inflation data.

The Bureau of Labor Statistics (BLS) has released the Consumer Price Index (CPI) data for April, showing U.S. inflation fell to 4.9%, a steady decline from March’s 5%. The All Urban Consumers (CPI-U) increased 0.4% on a seasonally adjusted basis in April, following a 0.1% rise in March.

Potential Federal Reserve response

The primary cause of the monthly increase was housing, with subsequent increases in fuel and used automobiles and trucks indices. The energy index climbed 0.6% in April, as the gasoline index rose, offsetting declines in other energy components. Meanwhile, the food index remained unchanged from March to April, with a 0.2% decrease in the index for food consumed at home and a 0.4% increase for food consumed away from home.

The Federal Reserve did not indicate its plans for interest rates in its previous FOMC meeting. Fed Chairman Jerome Powell mentioned that rate hikes may be nearing their end. The lower inflation numbers could result in a more cautious Fed outlook, possibly pausing interest rate hikes. This may give investors a sense of relief and stimulate investment. However, the Fed’s inflation target is 2%, and the current figures are double that amount.

Implications for the crypto market

The recent inflation data may lead to positive price movements in the struggling crypto market. Bitcoin (BTC) has dropped below $28,000, but the latest data could boost investor confidence and spur BTC growth.

Inflation rates have significantly decreased since hitting 40-year highs last summer. Investors speculated that the Fed’s efforts to combat inflation would be followed by a series of rate cuts. However, Powell indicated that lowering rates might not be wise if prices take time to drop.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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Damilola Lawrence

Damilola is a crypto enthusiast, content writer, and journalist. When he is not writing, he spends most of his time reading and keeping tabs on exciting projects in the blockchain space. He also studies the ramifications of Web3 and blockchain development to have a stake in the future economy.

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