Can the Fed Save Trump? March CPI Increases Rate Cut Expectations, Yet Bitcoin Still Declines!

TradingKey - The March CPI in the U.S. fell short of expectations, increasing hopes for a rate cut. But why is Bitcoin dropping instead of rising?

On Thursday evening, the U.S. Bureau of Labor Statistics released  CPI data for March, revealing a year-over-year increase of 2.4%—below the market's forecast of 2.6%. Core CPI rose by 2.8%, also undershooting expectations of  3.0%.

Following CPI report, markets priced in a stronger likelihood that the Federal Reserve will hold interest rates steady in May. However, the probability of a 25-basis-point rate cut in June jumped from 49% to 61%. Despite the cooling inflation data, Bitcoin (BTC) saw  a sharp decline, falling below the $80,000 mark.  By early Friday  morning, the cryptocurrency had dropped to as low as $78,000 but before staging a partial recovery.

Bitcoin Price Trend Chart, Source: CoinMarketCap.

Recently, Trump has sharply raised tariffs on Chinese imports—from 104% to 125%, and and most recently to 145% as of last night. In response, China has retaliated by hiking tariffs on U.S. goods from 34% to 84%, now matching the 125% level.

The tariff war is intensifying, fueling growing market anxiety.  As a result, optimism about the potential benefits of a Federal Reserve rate cut is fading.  

Still, Trump's tariff  measures are unlikely to be permanent. Over time, they may be scaled back or lifted entirely. If this occurs alongside Fed rate cuts, it could help ease market fears and potentially reverse the current downward trend.