US Inflation Hits 3.8%, Highest Since May 2023

Inflation is back in the spotlight. The US Consumer Price Index rose 3.8% year-over-year in April, the fastest pace since May 2023. Core CPI, which excludes food and energy, came in at 2.8%-above Wall Street's 2.7% forecast.

On a month-over-month basis, headline CPI increased 0.3%, the largest gain since June 2022. Services inflation and shelter costs remain the main drivers, with energy prices posing additional upside risk.

With core inflation still at 2.8%, well above the Fed's 2% target, there is little room for rate cuts. Markets had priced in easing, but the data keeps borrowing costs high.

For risk assets like crypto, sustained higher rates mean more volatility. Unlike the 2022 cycle, spot Bitcoin ETFs and the recent halving offer new support. But if core inflation stays above 2.5% through summer, the chance of any 2024 rate cuts fades to near zero.