Tonight at 8:30, a set of key data will be released, and market trends are likely to be rewritten as a result. March CPI is expected to be 3.3%, previous value 2.4%; core CPI year-on-year is expected to be 2.7%, previous value 2.5%. This inflation rebound is not a gentle rise but a clear warning signal being sent to the market.

Data is certainly important, but more crucial is the underlying logic: where does the inflation momentum come from? In which direction will it evolve next?

First is the primary driver of inflation: oil prices. The regular gasoline price soared from $2.89 at the end of February to $3.91 at the end of March, an increase of 35%. Gasoline accounts for 3% of the CPI weight, and this alone is enough to push inflation up by about 0.5 percentage points. Although recent Middle East tensions have eased and oil prices have fallen significantly, wholesale price increases have already transmitted to retail, and the prices at gas stations reflect last month’s cost pressures.

Second is the second driver of inflation: tariffs. This factor is more subtle and has a longer-lasting impact. The entire industry chain of food, home appliances, daily necessities, and others is bearing cost pressures. As Goldman Sachs said, tariff costs are layered and transmitted, ultimately paid by consumers. Even if oil prices start to fall, the price increases caused by tariffs will continue to weaken residents’ purchasing power.

With these dual factors stacking up, the so-called “transient inflation” by the Federal Reserve no longer holds water. The Fed is currently in a dilemma: March non-farm payroll data was strong, and the economy has not weakened, but inflation still remains far from the 2% target. Federal funds futures show that the market believes there is over a 98% chance of holding interest rates steady in April, and rate cuts in the first half of the year are basically unlikely, with expectations for rate cuts in the second half becoming increasingly uncertain.

If sticky inflation in sectors like healthcare, housing, and services follows oil prices higher, the logic of secondary inflation will be confirmed, and “high-level sustained” inflation will become the new market consensus. At that point, the Fed is likely to continue tightening policies to suppress inflation, liquidity in the dollar will tighten, risk assets will face pressure, and crypto asset prices may also be impacted.

If inflation rises only due to energy and CPI data, representing market expectations-driven fluctuations, and core sticky sectors do not follow suit, then inflation is likely only a temporary rebound. The Fed’s policy pressure would be relatively manageable, and crypto assets might oscillate and then choose a new direction. #今晚CPI：降息预期vs关税通胀，谁赢 #霍尔木兹海峡，再次关闭！