The US November PCE report released last night showed that inflation is under control, and Federal Reserve officials expect a significant decline in interest rates next year, which also boosted the US stock and cryptocurrency markets with a rebound.
Last night (20th), the US Department of Commerce released the November Personal Consumption Expenditures Price Index (PCE), indicating that the overall PCE deflator in the US rose by 0.1% month-on-month in November, lower than the previous market expectation and the prior value of 0.2%; the year-on-year increase was 2.4%, slightly higher than the previous value of 2.3% but lower than the market expectation of 2.5%.
Additionally, the US November core PCE index rose by 0.1% month-on-month, lower than the expected 0.2% and the prior value of 0.3%; the year-on-year increase was 2.8%, the same as the prior value but lower than the market expectation of 2.9%. Overall, the US November PCE index was significantly below expectations, indicating that inflation is under control; in response, the financial website Forexlive also provided commentary:
Estimates based on the Consumer Price Index and other data indicate that the PCE index rose by 2.4% year-on-year for the 12 months ending in November, while core PCE rose by 2.8% year-on-year. This is an unexpectedly comprehensive cooling report, the dollar is being sold off, while bonds are rebounding.
The dollar index experienced a pullback last night (20th) after the release of the PCE report. Source: TradingView
Federal Reserve officials: Interest rates may significantly decline in the next 12 to 18 months
After the PCE report was released, Federal Reserve official Goolsbee predicted that interest rates could significantly decline in the next 12 to 18 months:
Inflation is still expected to reach the Federal Reserve's target of 2%. Today's data shows that the recent inflation surge is just a bump in the road. My prediction is that the interest rate path in 2025 will be slightly lower.
Interest rates may significantly decline in the next 12 to 18 months; the current policy rate is limited, and the policy rate is still far from neutral.
Additionally, another Federal Reserve official, Williams, also stated that recent data is consistent with the Fed's forecasts, the economic conditions are good, but it is expected that the growth rate will slow to 2% next year.
US stocks are rising together
As the Federal Reserve announced a 25 basis point rate cut on the 19th this week, it also indicated that the pace of rate cuts next year is expected to decrease from 4 times to 2 times, triggering a crash in the stock and cryptocurrency markets.
However, after the PCE report was released last night, the US stock market responded positively, with all four major indices showing an increase:
Dow Jones Industrial Average: Up 0.92%, or 391.59 points, at 42,749.87 points
S&P 500 Index: Up 0.85%, or 49.98 points, at 5,917.06 points
NASDAQ Index: Up 0.81%, or 155.67 points, at 19,528.44 points
Philadelphia Semiconductor Index: Up 1.69%, or 82.62 points, at 4,976.45 points
Bitcoin V rebounds
The cryptocurrency sector also welcomed a rebound, with Bitcoin quickly rising from $92,268 to over $97,000 around 20:15 last night, currently reported at $96,980, with a nearly 24-hour decline narrowing to 3.24%.
Bitcoin trend. Source: OKX
Additionally, altcoins such as Ethereum also showed a rebound, with ETH returning above $3,300 and SOL breaking through $190, with declines narrowing after the PCE report was released.
