Fed’s favorite inflation metric hits lowest since 2021: is this bullish for Bitcoin?

April core inflation data came in at 2.5% year-over-year, which is its lowest level since March 2021.

The Federal Reserve’s preferred inflation metric hit its lowest level since March 2021, giving a positive sign for Bitcoin’s (BTC) price. April’s core personal consumption expenditures price index, released on Friday, May 30, came out at 2.5%. This was in line with expectations and lower than March’s figure of 2.7%.

Core inflation excludes volatile prices of food and energy. However, even with these metrics included, April inflation readings were lower than those in March. Overall, consumer prices rose just 2.1% in April compared to the same month last year, down from 2.3% in March.

Figures suggest that the effects of U.S. tariffs on its major trading partners still haven’t trickled down to the consumer. This is a positive sign for the Federal Reserve, which has been keeping a close look on inflation, to keep it near its 2% target.

Still, both traders and the Fed remain concerned about the inflationary effects of tariffs. On a monthly basis, both core and overall prices rose just 0.1% from March to April. However, prices of durable consumer goods rose 0.5%, which may be an early sign of Trump’s tariffs taking effect.

What low inflation means for Bitcoin

While traders often see Bitcoin as a hedge against inflation, the Fed’s likely reaction to rising prices has negative effects for BTC. Namely, both Bitcoin and major crypto tokens tend to react positively to the high-liquidity environment brought by low interest rates.

When inflation is high, the Fed raises interest rates to cool off the market. Currently, the Fed is taking a wait-and-see approach , and is refusing to implement hasty cuts. This has a negative effect on both stocks and crypto. In a scenario where inflation stays low, the Fed could eventually face pressure to lower rates, potentially triggering a new rally in Bitcoin’s price.