The U.S. PCE inflation, the Fed’s favorite inflation gauge, cooled in June, representing a huge positive for the markets. The Bitcoin price has rebounded amid this development, with the leading crypto rallying to the psychological $65,000 level.
PCE Inflation Cools To 3.7%, In Line With Expectations
The latest BEA data shows that the PCE rose by 3.7% in June year-over-year (YoY), in line with expectations and down from 4.1% in May. The inflation index slowed by -0.1% month-over-month (MoM), also in line with expectations.
Meanwhile, Core PCE inflation also slowed in June, coming in at 3.3%, in line with expectations, and increased by 0.1% MoM, below expectations of 0.2%. It is worth noting that inflation slowed last month partly due to the pause in the U.S.-Iran war, which has again resumed.
Inflation continues to run well above the Fed’s 2% target, which prompted the Fed to hold rates steady yesterday for the fifth consecutive FOMC meeting. Notably, three Fed officials dissented in favor of a rate hike.
Bitcoin has rebounded amid the soft PCE inflation data, with the leading crypto asset in the green today. The BTC price is currently trading just above $65,000, up almost 2% today, according to TradingView data.
Odds Of A Rate Hike Fall Slightly
The odds of a Fed rate hike this year have slightly dropped amid the release of the PCE inflation data. Data from the top crypto prediction market platform Polymarket shows a 66% chance that the Fed will hike rates, down from 70% as of yesterday.
In the same light, market participants are further pricing in the possibility that the Fed will hold rates steady at the September FOMC meeting instead of hiking rates. CME FedWatch data shows a 44.4% chance that the Fed will keep rates unchanged, up from 28% as of yesterday.
However, potential fresh escalations in the U.S.-Iran war could again raise fears of a hike as the war continues to have a major impact on energy prices. The Fed has also maintained its hawkish stance regarding inflation, noting that it remains elevated and running above its 2% goal.