Bitcoin Falls as U.S. CPI Inflation Rises to Three-Year High of 3.8%

The U.S. CPI inflation surged to a two-year high in April and came in above expectations, causing Bitcoin to fall. The data is notably bearish for BTC and the broader crypto market as the Fed is less likely to lower rates anytime soon, with inflation on the rise due to the U.S.-Iran war.

U.S. CPI Inflation Comes In Above Expectations, Bitcoin Falls

Bureau of Labor Statistics data shows that the consumer price index rose by 3.8% in April year-over-year (YoY), above expectations of 3.7%. Meanwhile, the index rose 0.6% month-over-month (MoM), in line with expectations.

Furthermore, Core CPI rose 2.8% YoY and 0.4% MoM, both above expectations of 2.8% and 0.3%. The U.S. CPI is now at its highest level since May 2023, which is bearish for Bitcoin and the broader crypto market. As CoinGape reported earlier, crypto prices were already at risk of renewed selling pressure amid Wall Street’s prediction of hot CPI inflation data.

Bitcoin fell on the back of the data release, dropping to around $80,500. The leading crypto is currently trading at around $80,400, down over 1% from an intraday high above $81,000, according to TradingView data.

The U.S. CPI inflation data will further strengthen the case for the Fed to hold rates steady as the U.S.-Iran war puts pressure on energy prices. Market participants are already pricing in the possibility of the Fed holding rates throughout this year, with the Fed also signaling that a hike is also possible.

CoinGape reported that the odds of a Fed rate cut have fallen despite the U.S. Senate advancing Kevin Warsh’s nomination as Fed chair. Warsh is expected to be confirmed this week as the next Fed chair, which could also spark volatility as market participants gauge the future trajectory of the Fed’s monetary policy.

Odds Of Zero Cuts Rise Above 60%

The odds of the Fed making zero cuts this year have climbed to almost 62%, according to Polymarket data. At the same time, the odds of at least one cut this year have further declined to 19% as market participants continue to price out a cut amid the war in Iran.

This signals that the Fed is unlikely to lower rates despite the potential emergence of Warsh as the next Fed chair. The market will now turn its attention to the U.S. PPI inflation data, which will be released tomorrow and could also spark volatility for crypto prices.

Meanwhile, commenting on the U.S. CPI inflation data, Fed President Austan Goolsbee noted it was worse than expected. He added that there is an inflation problem in the country.