The latest data on the US Personal Consumption Expenditures (PCE) inflation has come in at 2.5% for July, a figure that has remained steady from the previous month and is slightly lower than market expectations. This unexpected cooling in inflation has sparked optimism among investors, leading to discussions about a potential rally in Bitcoin and altcoin prices.
US PCE Inflation Steady at 2.5%
According to the Commerce Department, the PCE inflation rate was recorded at 0.2% in July, slightly up from the 0.1% increase observed in June. On a year-over-year basis, the inflation rate held steady at 2.5%, just below the anticipated 2.6%. This deviation from expectations has fueled positive sentiment in the market.
The Core PCE index, which excludes volatile food and energy prices, also rose by 0.2% in July, mirroring the increase from June. Year-over-year, the Core PCE inflation rate remained unchanged at 2.6%, again coming in below the forecasted 2.7%.
Despite the steady inflation rates on a yearly basis, the figures being below market estimates have boosted investor confidence, increasing the likelihood of a rate cut by the US Federal Reserve in their upcoming September meeting.
Potential Rally for Bitcoin and Altcoins?
The cooler-than-expected PCE inflation data provides further justification for the Federal Reserve to consider trimming policy rates at their next meeting. Fed Chair Jerome Powell has previously indicated that rate cuts could be on the table if inflation remains within the Fed's target range.
According to the CME FedWatch Tool, there is a 69.5% probability of a 25 basis point rate cut by the Fed in September. St. Louis Fed President James Bullard has also expressed optimism about a potential rate cut in September, suggesting in a recent CNBC interview that two more 25 basis point cuts could follow in November and December.
In response to the inflation data, the crypto market has seen a slight recovery. Bitcoin (BTC) experienced a 1.2% drop over 24 hours but showed signs of recovery, trading at $59,624 after hitting a daily low of $58,707.62. Similarly, Ethereum (ETH) reversed its downward trend in the last hour and traded at $2,525. Other major altcoins also showed signs of recovery after a week of heightened volatility in the crypto market.
Despite the positive inflation data, the US 10-year Bond Yield rose by 0.45% to 3.880, and the US Dollar Index increased by 0.16% to $101.440, reflecting ongoing market uncertainty.
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