U.S. Personal Consumption Expenditures Index Indicates Persistent Inflation Pressure
The U.S. Bureau of Economic Analysis (BEA) released new data yesterday (28th) indicating that the Personal Consumption Expenditures (PCE) price index for February showed strong performance, reflecting ongoing inflationary pressures. As a result, both the U.S. stock market and Bitcoin faced significant impacts.
(Background: Fed’s Bostic: Only “one interest rate cut” expected this year; tariff war hinders inflation control effectiveness, Trump pressures Powell to cut rates again)
(Context: Trump pressures the Federal Reserve again: Grocery and gasoline prices are both falling, so cutting rates now would be great)
February PCE Data Overview
The BEA reported that the PCE price index rose by 0.3% month-on-month in February, with an annual increase of 2.5%. The core PCE price index, excluding the volatility of food and energy prices, increased by 0.4% month-on-month, with an annual growth rate of 2.8%.
Notably, the core PCE annual growth rate of 2.8%, favored by the Federal Reserve (Fed), exceeded market expectations of 2.7%, reaching a new high since December 2024. The month-on-month increase of 0.4% also surpassed the anticipated 0.3%, marking the highest level since January 2024.
Additionally, the latest report from the University of Michigan on Friday indicated that the U.S. consumer confidence index for March plummeted to the lowest level in over two years, with long-term inflation expectations climbing to their highest point in 32 years.
Analysts: PCE Data May Force Fed to Revise Rate Cut Plans
The February PCE data suggests that inflationary pressures have not eased, with the unexpected rise in core PCE being particularly concerning. In response, market analyst @Phyrex_Ni pointed out that external factors such as tariff policies are likely to hinder the decline of inflation in the short term, which may force the Fed to reassess its rate cut plans. Although the Fed projected two rate cuts in 2025 during the March FOMC meeting, the strong performance of this data may delay the timing of rate cuts or even reduce their frequency, casting a shadow over the policy outlook.
The core PCE data has been released, and it is slightly higher than market expectations; February’s figure is 2.8%, up from January’s 2.6%. Even without substantial tariff interference, inflation has still seen a slight increase. If the effects of tariffs are considered, inflation may continue to face challenges in the short term. …https://t.co/T9Mjym2pWKpic.twitter.com/JatVYUxzVv
— Phyrex (@Phyrex_Ni) March 28, 2025
FedWatch: Probability of Rate Cut in June Rises to 65%
However, according to the latest data from the CME FedWatch tool, the current market expects that the Fed will likely maintain the current interest rates in May. Following the release of the PCE data, the probability of a rate cut in June increased from the previous day’s 58.4% to 65%, while the likelihood of keeping rates unchanged dropped from 34.5% the previous day to 25.3%.
U.S. Stock Market Declines
Following the release of the PCE data, the U.S. stock market reacted, showing that investors are concerned that the unexpected rise in inflation may lead to a delay in rate cuts by the Fed. Furthermore, the Trump administration is set to announce its reciprocal tariff plan on April 2, exacerbating the decline in consumer confidence. Last night, all four major U.S. stock indices closed in the red:
- The Dow Jones Industrial Average fell by 715.8 points, or 1.69%, to close at 41,583.9 points.
- The Nasdaq Composite Index dropped by 481.04 points, or 2.7%, to close at 17,322.99 points.
- The S&P 500 Index decreased by 112.37 points, or 1.97%, to close at 5,580.94 points.
- The Philadelphia Semiconductor Index fell by 130.35 points, or 2.95%, to close at 4,284.91 points.
Bitcoin Stays Above $84,000
The cryptocurrency market also felt the effects of the PCE data. Bitcoin, which had been declining since the afternoon of yesterday (28th), faced further selling pressure after the PCE report, reaching a low of $83,585. However, as of the time of writing, the price has rebounded slightly to $84,373, with a nearly 24-hour drop of 3.38%.
Bitunix analysts suggest that with Bitcoin’s price currently consolidating, if the PCE data favors risk assets, Bitcoin could rise to the range of $89,000 to $90,000; otherwise, it may correct to the range of $76,500 to $80,000.
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