- April saw inflation stay over the Fed’s target range, with the CPI increasing 3.4% from the previous year.
- Long-term high interest rates may encourage more people to invest in cryptocurrencies as an alternative to traditional markets.
Though expectations were for a slowing economy, inflation in April probably continued to be higher than Federal Reserve officials would have liked. Early projections point to inflation staying high, which would put the Fed out of its comfort zone.
This week the United States will release important CPI data for April. It likely rose 3.4% over the year, compared to a 3.5% annual increase in March, according to forecasts. Higher gasoline prices in April may cause inflation to remain high. But wholesale used car auction prices…
— Wu Blockchain (@WuBlockchain) May 13, 2024
What Drived April’s CPI: An Overview
The Consumer Price Index (CPI) shows a little decline from 3.5% in March to 3.4% year over year in April. This information continues to exceed the Federal Reserve’s target of 2% annual inflation, according to consensus projections from Bloomberg and highlighted by Wells Fargo Securities.
In keeping with this, the “nowcast” from the Federal Reserve Bank of Cleveland also predicted a 3.5% rise, highlighting the ongoing inflationary pressure.
Surprisingly high prices during the first quarter of inflation hampered the predicted drop from levels of the previous year. The persistently high prices had an impact on a number of industries, but home budgets were particularly hard hit.
Groceries and gasoline prices skyrocketed, forcing the Federal Reserve to hold steady its benchmark interest rate, which affected all kinds of borrowing, from credit cards to mortgages.
Fed Rate Cut on Pause: The Waiting Game
Officials at the Fed are still being circumspect, indicating that any decision to lower the 23-year high fed funds rate would not take place before December, in line with what ETHNews previously disclosed.
This position is predicated on the requirement for a distinct declining trend in inflation, which, as far as Bank of America economists Stephen Juneau and Michael Gapen are concerned, has not yet materialized.
Ahead: The Response of Crypto to Economic Developments
The Fed’s unwillingness to lower rates, combined with the ongoing high inflation, may have an impact on the cryptocurrency markets. Usually considered an inflation hedge, the current economic concerns may cause cryptocurrencies to respond differently.
Experts believe that the protracted high interest rate environment could encourage investors to consider cryptocurrency as a substitute investment.