CPI Cools to 2.3% – Is the Fed Now Closer to Cutting Rates?

The latest U.S. inflation data just dropped—and it’s exactly what markets were hoping for.

April’s Consumer Price Index (CPI) came in at 2.3% YoY, slightly below the expected 2.4% and the lowest since early 2021. Core CPI held steady at 2.8%, but the overall message is clear: inflation is cooling.

For traders, this changes the game. With inflation now trending lower, expectations for a Fed rate cut are back on the table—possibly as soon as September. Some analysts even see room for 2-3 cuts by year-end, depending on upcoming data.

💱 What about Forex?

Lower inflation means lower interest rate expectations—and that’s typically bearish for the U.S. Dollar.

• The Dollar Index (DXY) dipped as traders started pricing in more aggressive easing by the Fed.

• EUR/USD bounced higher, reclaiming territory above 1.0850. If the dovish Fed narrative holds, this pair could test 1.10 again in the coming weeks.

• USD/JPY saw renewed selling pressure after failing to hold above 156.00, as yield differentials start to narrow.

In short, USD bulls are on the defensive, and traders may look for opportunities in long EUR/USD or GBP/USD setups if the rate-cut narrative strengthens.

📈 What does this mean for stocks?

• U.S. equities rallied sharply on the CPI release. The S&P 500 and Nasdaq surged, led by rate-sensitive sectors like tech and real estate.

• A lower rate environment typically boosts growth stocks, as future earnings become more attractive in a lower-yield world.

• If the Fed confirms a dovish pivot in upcoming meetings, this could mark the beginning of a new risk-on cycle.

₿ Crypto Finds a Tailwind

Crypto markets responded positively, with Bitcoin and Ethereum regaining momentum. Rate cut expectations usually lead to a weaker dollar and more risk appetite, which benefits digital assets.

Investors may see this as a green light to re-enter or add to positions ahead of potential summer rallies.

🧠 Final Thoughts

This CPI print isn’t just a number—it’s a turning point. If inflation continues easing, the Fed may finally start cutting rates, possibly by September.

As always, traders should stay alert to shifts in Fed messaging, geopolitical risk, and macro data. But for now, the tone has changed—and those who adjust early may find the best setups.