The latest PCE report from the US Bureau of Economic Analysis shows that the US central bank’s favorite inflation measure, Personal Consumption Expenditures (PCE), rose 0.3% in February from the previous month. This is in line with market expectations. But what does this mean for the economy and for crypto?
Influence of CPI and PPI on the economy
It means that inflation, along with the Consumer Price Index (CPI) and the Producer Price Index (PPI), continues to rise. The core PCE index also rose 0.3%, a slowdown from the previous month’s 0.5% gain. On an annual basis, the PCE rate rose slightly to 2.5% from 2.4%, while core PCE inflation was in line with expectations at 2.8%, slightly lower than the previous month’s 2.9%.
Financial giants such as JPMorgan, Bank of America and Goldman Sachs expect inflation to cool in the coming months. However, JPMorgan Chase CEO Jamie Dimon suggests the Fed may have to wait until after June before considering cutting rates. The CME FedWatch tool shows a 61% chance of a rate cut in June, with a further 25 basis point cut as a 49% chance in September.
The US dollar and the bond market
In the currency market, the US dollar index (DXY) has risen and is now above 104.50 on Friday. Yields on US 10-year government bonds (US10Y) hover around 4.20%. These moves come as investors find some relief from the PCE inflation report, reinforcing expectations that the Fed will soon begin cutting rates.
The influence of this data on crypto
The price of bitcoin often moves in the opposite direction to the US dollar and government bonds. In recent days, bitcoin ETFs have been seeing large inflows, with a net inflow of 182.8 million on Thursday. GBTC outflows are also declining as FTX and Genesis have sold their positions.
Source: https://bitcoinmagazine.nl/nieuws/bitcoin-stabiel-ondanks-renteverhogingen
