Federal Reserve Rate Cut Expectations: A Magnifying Glass on CPI Data

The importance of CPI data lies not only in its revelation of inflation trends but also in its guidance on Federal Reserve monetary policy. The Federal Reserve maintains the federal funds rate in the range of 4.25%-4.5% and reiterates that it will decide whether to cut rates based on the data.

The market generally believes that if the April CPI confirms a slowdown in inflation, the Federal Reserve may initiate a rate cut cycle as early as June or July, which will provide strong support for risk assets. "The warming of rate cut expectations is a direct catalyst for high-risk assets like Bitcoin," Thielen analyzed, "If the CPI data is below or in line with expectations, it will enhance the market's confidence in the Federal Reserve's easing policy and drive funds into the crypto market." However, the trend of core CPI may be a key variable. RBC expects core CPI to remain flat year-over-year at 2.8%, but if rental or service prices rise unexpectedly, it could lead to core CPI exceeding expectations, thereby weakening rate cut expectations.

The April CPI data will play a key role against the backdrop of easing China-U.S. trade tensions. Whether it's Bitcoin's surge or the warming of Federal Reserve rate cut expectations, the market is at an important crossroads. Prudently grasp the opportunities and risks brought by the resonance of macro and crypto markets in this round.