Inflation in the U.S. continued to be high in April, putting renewed pressure on risk assets and taking a toll on crypto assets as well. The Federal Reserve’s favored inflation gauge, the Personal Consumption Expenditures (PCE) Price Index, increased notably. The US PCE inflation met the Wall Street analyst expectations from JPMorgan and Goldman Sachs.
US PCE Inflation In Line With Wall Street Estimates
The US PCE inflation rose 0.4% month-on-month in April, less than the forecast of 0.5%, according to data released on Friday. Headline PCE was unchanged from Wall Street estimates and at 3.8% annually, the highest reading since August 2023. It even marks a major increase from March’s PCE level of 3.5%.
The US Core PCE rose 0.2%, missing the 0.3% forecast, in April, per U.S. Bureau of Economic Analysis report. The annual Core PCE inflation figure was at 3.3%, similar to the forecasts.
The report on the inflation came in at a sensitive time in the financial markets. With inflation fears remaining high, investors have been eagerly awaiting hints at the Fed’s next step.
CME FedWatch tool has now begun to reflect traders’ increasing pricing for a longer rate-hike cycle. It includes an expectation of 100 basis points of rate hikes by 2027. Such hawkish expectations have pushed the BTC price down further as it already struggling amid geopolitical conflict.
Meanwhile, big Wall Street firms such as JPMorgan, Bank of America, Goldman Sachs, Morgan Stanley and UBS had predicted a 3.8% headline PCE reading ahead of the release. They cited that inflation getting hotter could add pressure on risk assets like Bitcoin and crypto.
BTC Price Continues To Drop
Bitcoin continued to fall after the release, as overall risk appetite declined. The US dollar index and the benchmark 10-year Treasury yield rose during the day, while stocks, gold and cryptocurrencies declined. Geopolitical tension fuelled by the continued buildup of the US-Iran conflict also added to market volatility.
Bitcoin’s weakness isn’t enough evidence to suggest an overall market breakdown, said crypto analyst Michaël van de Poppe. He wrote on X, “The standard approach is playing out here: in the final days of the month, markets correct as rebalancing takes place among asset managers.”
He pointed out that Bitcoin never managed to clear the $77,000 barrier, thereby pushing other altcoins down. An important support zone currently is being tested for the BTC price, said Poppe. The analyst added, “otherwise, I’d expect lower $60Ks to be tested for support.”
He also called out the current state of crypto sentiment as “worse than 2022, 2018.” However, Poppe signaled at a rebound. In this perspective, he added, “Nobody even believes in a future of crypto assets that are going to do well. For most of those assets, this is the case. For some, there’s a transition coming and they’ll be rewarded.”
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