- US core CPI came in at 3.1%, below the expected 3.2%, increasing the likelihood of Federal Reserve interest rate cuts.
- Markets now price a 31.4% chance of a rate cut in May, with expectations for three cuts by year-end jumping to 32.5%.
- Despite positive inflation data, Bitcoin declined from $84,000 to $83,000 amid concerns over Trump’s trade policies and macroeconomic uncertainty.
US inflation continued its downward trend as the latest core Consumer Price Index (CPI) registered at 3.1% in March, beating analyst expectations of 3.2%. This cooling inflation was accompanied by a 0.1% decrease in headline inflation figures, boosting prospects for Federal Reserve monetary easing this year.
The lower-than-anticipated inflation reading has significantly increased market expectations for interest rate cuts. Matt Mena, crypto research strategist at 21Shares, suggests this development could inject much-needed liquidity into markets, benefiting risk assets like cryptocurrencies.
“Rate cut expectations have surged in response — markets now price a 31.4% chance of a cut in May, up over 3x from last month, while expectations for three cuts by year-end have jumped over 5x to 32.5%, and four cuts have skyrocketed from just 1% to 21%,” Mena noted.
Despite these encouraging inflation figures, Bitcoin (BTC) failed to capitalize on the news. The leading cryptocurrency declined from above $84,000 at the daily open to approximately $83,000, as traders weighed concerns about US President Donald Trump‘s trade policies and broader macroeconomic uncertainties.
According to the CME Group, most market participants now believe the Federal Reserve will implement interest rate cuts by June 2025. This shift in sentiment comes after months of cautious rhetoric from central bank officials.
## Trump’s Strategy: Market Pressure for Rate Cuts?
Federal Reserve leadership has consistently signaled patience regarding rate reductions. Chairman Jerome Powell has repeatedly stated that the central bank isn’t rushing to cut rates, a position reinforced by Fed Governor Christopher Waller.
In a February speech at the University of New South Wales, Waller advocated for pausing interest rate cuts until inflation showed further improvement. Market analysts have expressed concern that delaying rate cuts could trigger a bearish market cycle.
Investor and market analyst Anthony Pompliano speculated on March 10 that President Trump might be deliberately creating market turbulence to pressure the Federal Reserve into lowering interest rates.
The urgency for rate cuts is partly driven by the US government’s debt situation. According to The Kobeissi Letter, approximately $9.2 trillion in US government debt will mature in 2025 unless refinanced. Without lower interest rates for refinancing, the national debt—currently exceeding $36 trillion—could see ballooning interest payments.
These fiscal concerns have reportedly made interest rate reductions a top priority for the Trump administration, even if it means short-term market volatility for assets and businesses.
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