Inflation has been the top priority for the Fed and every time CPI data is released traders are sitting on the edge of their chairs. Only the press conference after each FOMC meeting is more anticipated than the actual CPI results. While inflation remains high and far away from a 2% goal, it has been declining throughout the last nine months in a row.

What does the recent CPI data tell us and why is this considered to be bullish news by some market analysts?

CPI rose below expectations

The good news is that the CPI data fell below expectations. It is the lowest hike in inflation since May 2021. The consumer price index stood at 5% YoY in March compared with the 6% that we have seen in February. The forecast was 5.2% and therefore the expectations are beaten by 0.2% and the inflation outlook becomes a little bit better.

The core CPI is still higher than some analysts would wish for and this could concern the Fed during the next meeting and possibly result in another rate hike. According to the CME Fed Watch Tool, there is a 32.8% chance that the Fed won’t raise the rates in May. However, it is more likely that the Fed is raising rates by 25 bps if we are to believe the forecast given by the tool.

Market participants must trust that the Fed will go easy on the markets and continues at a slower pace with the rate hikes.

Bitcoin is leading the charge

The fact that inflation is declining has healed the crypto market. After overcoming an existential crisis during the fall of FTX and Alameda, the Bitcoin price has recovered. BTC is up by 85.32% this year when measured from the 2023 bottom up to its top which was reached just yesterday.

It appears that the easing of US inflation has done its part to fuel the relief rally. This performance is outstanding when comparing it to the Nasdaq 100. While there is still a correlation between crypto and tech stocks, crypto and particularly Bitcoin has recovered even more.

In conclusion, investors who are looking for protection against a banking crisis or a recession will hold onto their BTC no matter what happens. But those with risk appetite and deep pockets might return when they feel that the Fed allows more room for the markets to breathe. Lower CPI data suggests that this moment is getting closer if inflation is continuing its decline.