US annual inflation rate dipped to 5% in March 2023, marking its ninth consecutive decrease. After dropping to 6% in February, the rate has now further declined to 5%. The highly anticipated CPI figures for March are finally out, by the United States Bureau of Labor Statistics but the Consumer Price Index (CPI) only climbed 0.1% last month. This result falls below economists’ expectations of a 0.2% gain and is down from a 0.4% increase in February.
US Dollar drops as consumer prices increase less than expected in march
Year-on-year, the CPI has risen 5.0%—the smallest gain since May 2021—compared to a 6.0% increase in February. Other important trends include an 8.5% climb in the food index, a 6.4% decline in the energy index, and a 0.1% increase in the CPI to 5.6% from the previous month. Additionally, higher housing costs have offset a 3.5% decrease in energy costs, while food costs have remained stable.
The big question on everyone’s mind is whether inflation will soar to 12% by the end of 2023. Some experts believe that the steady decline in 2023 could precede a dramatic surge. Michael Wilkerson, founder of Stormwall Advisors, has even suggested that US inflation could reach a staggering 12% by December 2023. However, the recent downturn appears to reduce the likelihood of such a drastic increase.
Earlier today, the US dollar experienced a significant drop as consumer prices increased less than expected in March. This development might reduce the chances of the Federal Reserve continuing to hike interest rates. Still, it’s important to note that the Core CPI remains higher than the previous month at 5.6% YoY, which means inflationary pressure is not entirely gone. As a result, analysts predict that at least one more rate hike is possible.
Fed funds futures traders are now pricing in a 69% probability that the Fed will raise rates by an additional 25 basis points at its May 2-3 meeting, down from around 76% before the data release. The market will closely watch retail sales data on Friday for insights into how consumer spending is being affected by higher prices. Additionally, the Fed will release minutes from its March 21-22 meeting later today.
As the US inflation narrative unfolds, the crypto community remains on high alert. Will the cooling trend persists, or will a dramatic upswing redefine the economic landscape and its impact on crypto markets? Only time will tell.
