Investors and economists alike were keeping a close eye on the Consumer Price Index (CPI) for the month of April.
This particular metric is considered highly important in predicting the Fed’s future moves with respect to interest rates and can have a significant impact on the overall market.
Previous predictions by experts suggested that the CPI for April would show a year-on-year increase of 5%, which remained considerably higher than the average increase observed over the past 20 years, though it would mark the lowest increase since May 2021.
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April’s Inflation Rate Declines
According to data released by the US Bureau of Labor Statistics, the U.S. Year-on-Year Consumer Price Index (CPI) has come in at 5.5%. The rate falls within investors’ expectations, suggesting that inflation is slowing.
Briefly after the data release, the crypto market regained bullish momentum, with Bitcoin surging by 1.64% in one hour and surpassing $28,000. The leading altcoins also rallied. Two cryptocurrencies that were the headlines in previous weeks, $PEPE and $SUI climbed by 3% and 5.61%, respectively.
This week, all eyes are set on the release of inflation data as it plays a crucial role in evaluating potential adjustments the Federal Reserve may make during its upcoming meeting in June. As reported, the inflation rate has declined for ten consecutive months. But the latest data remains above the Fed’s 2% target.
In addition to CPI data, other major macro highlights are jobless claims tomorrow and consumer sentiment data on Friday.
Numerous investors hold the belief that the performance of the US Consumer Price Index (CPI) could impact the future monetary policy of the US Federal Reserve (Fed). This includes the possibility that the Fed may opt to lower interest rates and loosen restrictions on high-risk investment channels.
Ticking Bomb Awaits?
As the US reportedly hits the debt ceiling in June, concerns mount for the economic outlook and its impact on the crypto market. According to the US Treasury Secretary Janet Yellen, the US is days away from a possible default as its debt deadline is set in June without concrete resolution.
If a country reaches its debt ceiling, it cannot borrow any more money to meet its financial obligations. Consequently, this scenario could lead to a default on the government’s debt, which would trigger a ripple effect throughout the economy. Historically, the US lifted the debt ceiling in response to the matter.
That being said, the House of Representatives passed a bill to extend the US debt limit on April 26 but President Biden refused to sign the bill. However, Bloomberg reported today that the President agreed to negotiate the terms.
Initially, the impact of a government debt default would be negative due to risk aversion, resulting in speculators selling off high-risk assets such as equities, emerging market currencies, bonds, and cryptocurrencies.
For the broader economy, a default can lead to a loss of confidence in financial markets, specifically the US dollar’s power. Massive selloffs across markets could lead to a recession or even a financial crisis.
Another enormous issue is the ongoing banking turmoils that resurfaced previously this month.
The recent struggles of mid-sized banks potentially lead to more fallouts, forcing banks to impose stricter lending standards for businesses and households. This scenario poses a risk to the US economic growth and economic observers believe it could persist into the next year.
Some market analysts stated that Bitcoin could be the light at the end of the tunnel. Jesse Meyers, Chief Operating Officer of investment firm Onramp, said that the event could ultimately have a positive effect on Bitcoin (BTC). The effect of a debt ceiling increase and the weakening dollar could drive liquidity to Bitcoin in the long run.