Inflation in the USA increased above expectations. In March, inflation increased by 0.4% and annual inflation was 3.5%. Expectations were that inflation would be announced as 3.4%.

The inflation figure exceeding the forecasts reduced the likelihood of the Fed’s interest rate cut in June. In addition, the market started to price only a 50 basis point cut for the whole of 2024. According to the CME FedWatch Tool, the probability of the Fed keeping interest rates constant is seen as 98.4% for May and 78% for June.

Morgan Stanley economists stated that concerns have increased that the interest rate cut prediction may not happen in June. On the other hand, Regan Capital analyst Skyler Weinand stated that inflation is accelerating again and interest rate cuts are off the table in the near term. Bankrate analyst Greg McBride said in a note published after the inflation data,”You can kiss a June interest rate cut goodbye, inflation came in higher than expected, the lack of progress toward two percent is now a trend,”.

Bitcoin fell after the inflation data. While the number one cryptocurrency was traded at $69,000, it lost more than 2% and fell to $67,500.

Fed members will also look at the Personal Consumption Expenditure Price Index (PCE) and Producer Price Index (PPI) data before the interest rate decision on May 1.