The value of the dollar fell sharply on Wednesday after data indicated that the increase in U.S. consumer prices in March was lower than projection.
According to CNBC, this development may decrease the probability of the Federal Reserve continuing to raise interest rates.
In March, the Consumer Price Index experienced a rise of only 0.1%, which was below what economists had predicted, with an expected gain of 0.2%. Nevertheless, core prices increased by 0.4%, in line with expectations.
Following the release of the data, the dollar index decreased from about 102.11 to 101.52. Meanwhile, the euro rose to its highest level since February 2, reaching $1.09900.
Dollar also declined against the Japanese yen, falling from approximately 133.85 to 132.81 before the data was made public.
According to Reuters, the core CPI, which excludes the unpredictable costs of food and energy, went up by 0.4% in March, following a 0.5% increase in February. The primary factor behind this was the steady rise in rental prices.
The senior market analyst at Convera in Washington, D.C.Joe Manimbo, said, “Headline inflation coming down more than expected is backing the view of the Fed being basically one more and done.”
“The market was just really cautious ahead of the data, as if it had been hotter than expected it might suggest that June might also be a live meeting. But I think with inflation taking a big step down from 6% to 5%, if that sustains, that could give the Fed leeway to cut rates later this year if we see a sharp slowdown in the economy,” Manimbo further stated.
