TLDR
- July PCE inflation data showed a steady 2.6% YoY, meeting expectations and signaling stability.
- Core PCE rose 0.3% MoM and 2.9% YoY, aligning with forecasts and suggesting controlled inflation.
- Bitcoin surged following the PCE release, with traders speculating on a potential Fed rate cut.
- Fed Chair Powell has indicated rate cuts may be necessary, balancing inflation and employment risks.
The release of the July Personal Consumption Expenditures (PCE) data came in line with expectations, showing an inflation rate of 2.6% year-over-year (YoY). This steady inflation rate has sparked a noticeable reaction in the cryptocurrency market, particularly for Bitcoin.
Following the report, the flagship crypto saw a sharp rise in price, breaking above $110,000. Traders are optimistic that the Federal Reserve may initiate a rate cut in September, based on this favorable inflation data.
Inflation Data Remains Steady
The Bureau of Economic Analysis revealed that the July PCE inflation rate rose to 2.6%, maintaining the same rate recorded in June. This is in line with analysts’ expectations. On a monthly basis, the PCE came in at 0.2%, lower than the 0.3% increase observed in June. These stable inflation figures suggest that price pressures are not escalating rapidly, providing a sense of stability in the economy.
Core PCE data, which excludes food and energy prices, also showed a consistent trend. It rose by 0.3% month-over-month (MoM) and 2.9% year-over-year (YoY), both meeting market expectations. This data suggests that inflationary pressures remain under control, which is critical for the Federal Reserve’s policy direction.
Bitcoin Reacts to PCE Release
Bitcoin’s price surged following the release of the July PCE data, reflecting positive sentiment in the market. According to TradingView, the crypto climbed above the $110,000 mark, trading around $110,700 at the time of writing.
The upward movement in Bitcoin’s price comes as traders anticipate that the Fed may consider a rate cut to address potential economic concerns. The release of inflation data that shows steady conditions aligns with the belief that the Fed may shift focus toward the softening labor market, rather than aggressive inflation control.
However, it is important to note that inflation risk remains a factor. While the PCE data suggests stability, the Federal Reserve still faces challenges in balancing inflation control with employment concerns. Fed Chair Jerome Powell has previously indicated that the labor market’s softness could require policy adjustments, though inflation continues to influence decisions. This data release thus supports the ongoing debate about the Fed’s policy approach.
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