US PCE Inflation at 2.8% Bitcoin Reacts Ahead of December Fed Meeting

TLDR

• US PCE inflation reaches 2.8%, signaling continued inflationary pressures.
• Bitcoin price holds strong above $92K as the market anticipates a Fed rate cut.
• Wall Street expects core PCE inflation at 2.9% ahead of the December Fed decision.
• Crypto market sees reduced volume amid options expiry and inflation data release.

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US PCE inflation has risen to 2.8%, sparking significant reactions in both the traditional financial and crypto markets. As Wall Street anticipates a potential 25 basis point rate cut by the Federal Reserve, Bitcoin’s price has surged above $92,000. Investors are bracing for volatility as the Fed’s next move could reshape market expectations. With inflation data in hand, all eyes are now on the upcoming FOMC meeting.

US PCE Inflation Rises to 2.8%, Bitcoin Climbs Ahead of Fed Decision

The U.S. PCE inflation report for September was released on December 5, showing a rise in inflation to 2.8%. This marks a slight uptick from the previous month’s 2.7%. Wall Street’s consensus was in line with this increase, expecting inflation to remain relatively sticky. This data is crucial as it is the Federal Reserve’s preferred inflation gauge, and it will play a key role in determining the central bank’s actions in its upcoming meetings.

Bitcoin, in particular, reacted positively to this report. With inflation remaining above the Federal Reserve’s 2% target, there has been speculation that the Fed might opt for a rate cut in its next decision. At the time of writing, Bitcoin had managed to stay above the $92,000 level, signaling a sense of optimism in the market despite the uncertainty surrounding broader macroeconomic factors.

Wall Street’s Expectations on US PCE Inflation

Wall Street analysts expected the PCE inflation data to show a modest rise in inflation, with a 2.8% year-over-year increase. Core PCE, which excludes volatile food and energy prices, was forecasted to reach 2.9%. The numbers align closely with August’s inflation print and reflect the ongoing challenge of achieving the Fed’s 2% inflation target.

Nick Timiraos of The Wall Street Journal noted that with inflation data from the CPI and PPI already available for September, core PCE was tracking at around +0.22%. This is similar to the core CPI, pointing to consistent inflationary pressures. These data points suggest that inflation remains persistent, but there is no immediate indication of a significant slowdown in the near term.

While some economists predicted a potential decline in inflation, the core PCE’s resilience above 2.8% signals that the path to achieving the Fed’s target will require more time.

Bitcoin and Crypto Market Response

Bitcoin has shown positive price movement, staying above $92,000, as investors anticipate a potential rate cut by the Federal Reserve. The latest PCE inflation report supports the argument for a 25 basis point reduction in rates, which the CME FedWatch tool now sees with an 87% probability.

Analyst Michael van de Poppe has been closely monitoring Bitcoin’s price action. He suggests that if Bitcoin holds support at $91.5K, there could be a potential rebound toward the $100K level. On the other hand, if it loses this level, the price may retest the $85,000 mark. The market’s direction seems uncertain, with many waiting for the outcome of the December Federal Open Market Committee (FOMC) meeting.

Furthermore, there has been a decrease in trading volume, which has fallen by 20% over the last 24 hours, coinciding with crypto options expiry. This decline in volume reflects the uncertainty prevailing in the market as traders position themselves ahead of the Fed’s decisions.

Fed’s Upcoming Decision and Its Effect on the Market

With inflation data in hand, the Federal Reserve is in a pivotal position. The U.S. economy continues to show signs of resilience, but inflation remains a persistent concern. Treasury Secretary Scott Bessent recently commented that there is no risk of recession or runaway inflation in the U.S. However, the uncertainty about inflationary trends leaves room for speculation regarding future monetary policy.

The crypto market will closely follow the FOMC meeting and any remarks from Fed Chair Jerome Powell. If the Fed decides to proceed with a rate cut, this could further fuel investor optimism, especially in risk assets like Bitcoin. However, with inflation still above the central bank’s target, the decision will likely balance between promoting growth and curbing inflationary pressures.

As the crypto market faces volatility and reduced trading volumes, many investors are waiting for clearer signals from the Fed. Bitcoin’s price trajectory could depend on whether the Fed continues its hawkish stance or shifts toward a more accommodative monetary policy.

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