U.S. inflation figures from March revealed a notable slowdown, spurring optimism across cryptocurrency markets as traders anticipated a shift toward more accommodative monetary policies by the Federal Reserve.
According to data from the Bureau of Labor Statistics, the headline Consumer Price Index (CPI) slipped to -0.1% month-over-month in March, down from February’s 0.2%. Year-over-year, headline inflation fell to 2.4% from 2.8%, approaching the Fed’s long-standing target of 2%.
Of particular interest was the core CPI figure, which removes the more volatile food and energy sectors. This key metric dropped from 0.2% to 0.1% for the month, bringing annual core inflation down to 2.8%, marking the first time it has dipped below 3% in years.
This inflation deceleration occurred despite significant economic uncertainties sparked by recent tariff hikes. President Donald Trump notably increased tariffs on Canadian and Mexican imports to 25%, undermining the USMCA trade agreement formed during his initial term. Moreover, he hiked duties on Chinese goods by an additional 20%, and imposed new tariffs specifically targeting imported steel and aluminum, essential materials in manufacturing and construction.
However, these tariff challenges have been partially counterbalanced by President Trump’s recent decision to pause the so-called Liberation Day tariffs on multiple nations, a move expected to ease inflationary pressures further.
The softer inflation data fueled renewed speculation on Wall Street that the Federal Reserve might soon switch toward interest rate cuts after holding a predominantly restrictive stance in recent months. Rate reductions by the central bank historically have provided upward momentum for risk assets, including cryptocurrencies.
In response, cryptocurrency markets experienced a noticeable upswing from recent weekly lows. Bitcoin (BTC) advanced sharply, briefly reaching around $82,000 after trading near lower levels during the preceding week. Ethereum (ETH) recovered to $1,600 and Ripple’s XRP climbed back to the $2 level.
This positive momentum echoed sentiment across U.S. equity markets, which rallied sharply after Trump’s announcement halting several pending tariffs and initiating negotiations with more than 70 different trading partners. Nonetheless, in a contrasting decision, tariffs on Chinese merchandise were raised significantly to 125%, impacting approximately $500 billion in goods.
Amid these developments, the probability of a U.S. recession also declined sharply, according to market indicators. Goldman Sachs, after previously increasing their odds of recession, became the first major banking institution to revise that forecast downward immediately following Trump’s tariff pause announcement. Reflecting similar sentiment, prediction markets such as Polymarket recorded lower recession expectations, falling from a recent high of 66% to about a 50% likelihood.
Analysts noted that persistent lower inflation and slowing economic growth increase the likelihood the Fed will soften its monetary policy stance. Should such monetary easing materialize, it would act as a powerful catalyst, potentially igniting another sustained rally across Bitcoin and broader cryptocurrency markets. The current crypto bull run, which began in early 2023, has in part been attributed to market expectations of looser Fed policies in reaction to steadily easing inflation pressures.
