CPI is as high as 3.8%, and the inflation pressure the Federal Reserve faces is far beyond imagination

The April CPI data released on May 13 shows a year-over-year rise of 3.8%, the highest since 2023. Core CPI also increased year-over-year from 2.6% to 2.8%, both of which exceeded market expectations. Prices are now nearly double the Federal Reserve’s 2% target!

Although the latest PCE report is broadly in line with expectations, the overall inflation rate is still as high as 3.8%, far above the target. Less than two weeks after Washington took office as Fed chair, he immediately has to deal with this hot potato. Many people in the crypto space think rate hikes have nothing to do with us, but that’s a big mistake. Interest rates affect U.S. dollar liquidity, and liquidity directly determines the market’s valuation center of gravity. Based on March 2026 data, after gold surged it fell into a period of consolidation due to strengthening rate-hike expectations. Bitcoin, meanwhile, is constrained by price pressure from a stronger dollar, and it is also looking for a “safe haven” balance outside sovereign assets.

In my view, the Federal Reserve will keep a high-interest-rate policy for quite a while, and the earliest chance to discuss rate cuts will be after September. It’s certain that rates will be held steady in June, and on Polymarket I’ll bet on no change. But in the long run, being long Bitcoin requires caution—once rate-hike expectations heat up, the tightening of liquidity will suppress the crypto market very noticeably.

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