"Today’s lower-than-expected personal consumption expenditure (PCE) numbers have strengthened the dovish sentiment sparked by last week’s rate cut, fueling optimism that inflation pressures are cooling faster than anticipated," 21Shares crypto research strategist Matt Mena said in an email sent to The Block.
Mena noted that this recent inflation data creates a favorable backdrop for bitcoin and the wider cryptocurrency market. "Investors are gravitating toward risk assets, anticipating a more accommodative Fed stance moving forward, and bitcoin had already anticipated today's positive news and effectively front-ran it," he explained.
The 21 Shares analyst said that this supportive environment is likely to bolster risk assets like bitcoin, enhancing investor confidence and setting the stage for a potential retest of the $68,000 to $70,000 range.
The U.S. personal consumption expenditure (PCE) data for August, the Federal Reserve’s preferred measure of inflation, moderated more sharply than expected last month to 2.2%, down from 2.5%. This marks the lowest level since 2021. Although the core PCE report rose slightly to 2.7% on an annualized basis, the monthly increase of 0.1% was half the rate economists expected.
Additionally, personal income and spending figures were both lower than anticipated, reinforcing the Fed's decision to cut interest rates by 50 basis points on September 18.
Mena also pointed out that other global factors, such as China’s recent liquidity injections and widespread interest rate cuts, are likely to further enhance market liquidity. The analyst added that this is expected to boost global M2 — a measure of the global money supply — which has historically shown a strong positive correlation with bitcoin’s price.
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