U.S. Inflation Cools to 2.4% Ahead of Fed Meeting—What Comes Next for Markets?

The U.S. inflation rate cooled more than expected in March, falling from 2.8% in February to 2.4% year-over-year. This shift comes just ahead of the Federal Reserve’s highly anticipated May meeting and follows President Donald Trump’s surprise announcement of a 90-day pause on select tariffs, aimed at calming both economic and geopolitical tensions.

Inflation Drops, but Volatility Remains

The latest Consumer Price Index (CPI) data revealed that inflation is losing momentum. The CPI for All Urban Consumers declined by 0.1% in March, seasonally adjusted, following a modest 0.2% increase the previous month. The Bureau of Labor Statistics noted that the index rose 2.4% over the past 12 months before seasonal adjustments, supporting the narrative that inflationary pressures are easing across the economy.

Despite the favorable inflation data, markets remain volatile. While the tariff suspension briefly boosted investor sentiment, the rally proved short-lived. By Thursday morning, major U.S. stock indexes sharply reversed. The Nasdaq dropped 483 points, the Dow tumbled 750 points, and the S&P 500 lost 119 points just 15 minutes after the opening bell.

Fed’s Next Move: Holding Steady or Cutting Rates?

As inflation cools, traders are eyeing the Federal Reserve’s next steps. According to CME’s FedWatch tool, there is a 79.1% chance that the Fed will hold interest rates steady in May. However, policymakers have hinted at possible rate cuts later in the year, contingent on sustained price moderation and economic resilience.

Crypto and Commodities React Differently

While stocks plunged, bitcoin hovered just under the $82,000 mark, showing relative stability despite the broader market turbulence. Gold, meanwhile, surged to $3,134 per ounce as investors sought refuge in safe-haven assets.

Despite market jitters, the White House remains optimistic. A spokesperson declared Thursday morning, “Inflation is down, jobs are up, and the Golden Age of America is underway.” Still, with uncertainty swirling around the Fed’s next steps and geopolitical trade dynamics, investors will need to remain cautious as markets digest these fast-moving developments.

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