The U.S. Department of Commerce released PCE data for May yesterday (28th), showing that inflation slowed down again, which once again strengthened the market's bets that the Fed will start cutting interest rates in September. The U.S. stock market rose slightly collectively, but Bitcoin could not reverse its downward trend.
Following the May CPI data and retail sales data released by the United States earlier this month showing a cooling of inflation, the Ministry of Commerce released another important indicator for measuring inflation yesterday (28), namely the May PCE (Personal Consumption Expenditures Price Index) data, showing that inflation slowed down again. Specifically:
The overall PCE in May remained unchanged from the previous month, with a monthly increase of 0.3% in April; compared with the same period last year, the increase was 2.6%, and the annual increase in April was 2.7%, which was in line with market expectations.
Core PCE, which excludes volatile food and energy prices, increased by 0.1% in May, and the monthly increase in April was revised up from 0.2% to 0.3%. The annual growth rate of core PCE, which remained at 2.8% for three consecutive months, slowed to 2.6% in May, the smallest increase since March 2021.
Experts: Fed is expected to start cutting interest rates in September
The Fed has frozen the federal benchmark interest rate at 5.25% to 5.5% since July last year. Although Fed officials have repeatedly released hawkish remarks, claiming that there will be only one rate cut this year, the recent inflation data still boosts market confidence, believing that the Fed may start cutting interest rates in September and will cut interest rates twice this year.
Beth Ann Bovino, chief economist at U.S. Bank, said yesterday after the PCE data came out:
We do expect the real economy to weaken, but not fall off a cliff, just weaken, which means that inflation will also slow down in the future. This gives us reason to expect that the Fed may start cutting interest rates in September.
We all know it depends on the data and the Fed is still waiting. Are they still waiting? Will there be only one cut this year? I can't rule it out, but the data seems to provide the Fed with a reason to cut twice this year.
In addition, according to the CME Fed Watch tool, the market is also inclined to believe that the Fed will start cutting interest rates in September, with a probability of 59.5%, and the probability of maintaining interest rates unchanged in September is only 34.1%.
As for the interest rate in December, the market expects the Fed to have a 44% chance of cutting interest rates for the second time in December and a 30.4% chance of starting to cut interest rates in December. Almost no one believes that the Fed will maintain the current interest rate level in December.
U.S. stocks rose
After the PCE news came out, the four major U.S. stock indexes all rose, with the Philadelphia Semiconductor Index seeing the largest increase:
Dow Jones Industrial Average: Up 0.12%, or 45.03 points, to 39,209.25
Standard & Poor's index: Up 0.11%, or 6.26 points, to 5,489.28 points
Nasdaq: Up 0.028%, or 5.08 points, to 17,862.32
Philadelphia Semiconductor Index: Up 1.39%, or 75.37, to 5,496.47
Bitcoin falls to $61,000
On the cryptocurrency side, the PCE news failed to save Bitcoin from its recent decline, and BTC even fell slightly. In addition, the SEC announced in the evening that it would sue Consensys and claim that Lido and other staking projects were securities, which exacerbated the market decline. Bitcoin once fell below $61,000. At the time of writing, Bitcoin was 60795, but the trend was still unclear.
Ethereum is following a similar trend and has fallen below $3,400 to trade at $3,386 at the time of writing.
