Hot April CPI Revives Fed Rate Bets, Pressures Bitcoin

The Bureau of Labor Statistics on May 12 reported headline CPI rose 3.8% year over year in April, above the 3.7% consensus estimate. Core CPI, which excludes food and energy, climbed 2.8% year over year and 0.4% month over month. The Federal Reserve left its policy rate at 3.50%–3.75% at the April 29 meeting.

Bond markets moved on the report. The two-year Treasury yield rose three basis points to 3.98% and the 10-year yield gained four basis points to 4.45%. The dollar index increased 0.3% to 98.29. Major U.S. equity indexes opened lower following the release.

Energy contributed strongly to the headline number, rising 3.8% in April and accounting for more than 40% of the monthly all-items increase. Gasoline was up 28.4% year over year. Shelter costs rose 0.6% for the month, with rent and owners’ equivalent rent each up 0.5%. Airline fares increased 2.8%. The BLS noted a one-time rent adjustment tied to the government shutdown that temporarily pushed core inflation higher.

Market participants adjusted expectations for the Federal Reserve’s rate path after the CPI release. Two banks moved their first-rate-cut forecasts later this week, and futures pricing now shows traders assigning a higher probability that the current Fed policy range will remain in place longer than before.

Bitcoin fell on the CPI print, briefly dropping below $80,000 before trading between $80,000 and $81,000. Matt Mena, senior crypto research strategist at 21Shares, described the market as “positioned for a hot print, absorbed the data, and held above $80,000,” identifying that level as support. He added that a clean daily close above $82,000 could open a path to $85,000 and a retest of the $88,000–$90,000 area.

Several industry developments are running alongside the macro picture. The Senate Banking Committee scheduled a markup for the CLARITY Act on May 14 at 10:30 a.m. ET. White House crypto adviser Patrick Witt told conference attendees to expect a “big announcement” on a Strategic Bitcoin Reserve “in the next few weeks.” The U.S. currently holds an estimated 328,372 BTC from prior seizures.

Spot Bitcoin ETFs continued to show net inflows. Inflows ran positive for six straight weeks, absorbing more than $3.5 billion and netting about $1.29 billion through May 11. Daily inflows peaked at $629.8 million on May 1 and $532.3 million on May 4, then turned negative on May 7 and May 8.

The producer price index for April was set as the next macro data release, with traders watching for a reading that could affect Treasury yields and dollar strength. Analysts noted that an in-line or cooler PPI could help stabilize yields and support Bitcoin’s short-term technicals, while a hotter PPI could reinforce expectations of a longer pause in Fed easing and put renewed pressure on risk assets.

Traders pointed to performance figures across assets since January 2024. Bitcoin’s compound annual growth rate was reported at about 42.3%, compared with roughly 41% for gold, 27% for the Nasdaq and 19% for the S&P 500, figures market participants use when assessing asset allocation amid the current liquidity backdrop.