US consumer price index rises 3.8%, highest since May 2023
Inflation just reminded everyone it’s still very much in the room. The US consumer price index climbed 3.8% year over year in April, marking the fastest pace of price increases since May 2023, when CPI hit 4%.
The numbers behind the number
Core CPI, which strips out the rollercoaster of food and energy prices to give a cleaner read on underlying inflation, rose 2.8% year over year. Wall Street consensus had expected 2.7%.
On a month-over-month basis, headline CPI increased 0.3% in April. That’s the strongest single-month gain since June 2022, a period when inflation was still raging near its post-pandemic peak and the Fed was hiking rates at a pace not seen in decades.
Services inflation and shelter costs continue to be the stubborn anchors keeping the index elevated. Energy prices, while not the primary driver this month, remain a wildcard that could push readings even higher if geopolitical tensions escalate or supply disruptions materialize.
What the Fed is thinking
A core reading of 2.8%, still sitting well above the 2% target, gives the Fed essentially zero reason to rush toward easing monetary policy. Markets had been pricing in the possibility of rate cuts in the coming months. When borrowing costs stay elevated, the opportunity cost of holding non-yielding assets rises.
What this means for crypto and risk assets
When the macro backdrop shifts toward sustained higher interest rates, volatility in crypto tends to spike. Look at the pattern from 2022: when CPI prints were running hot and the Fed was hiking aggressively, Bitcoin dropped from its all-time highs and spent months grinding lower.
The market structure is different now, with spot Bitcoin ETFs providing a new demand floor and the recent halving reducing new supply issuance. If core inflation remains stubbornly above 2.5% through the summer, the probability of any 2024 rate cuts drops toward zero.
