Breaking: U.S. PCE Inflation Rises To 2.9% YoY, Bitcoin Falls

The U.S. PCE inflation data have come in above expectations, signaling that inflation may be on the rise again. Bitcoin notably declined on the back of the data release, which strengthens the case for the Fed to hold interest rates steady for a while.

U.S. PCE Inflation Rises To 2.9% In December

According to the Bureau of Economic Analysis, PCE, which is the Fed’s favorite inflation gauge, rose to 2.9% year-over-year (YoY) in December, above expectations of 2.8%. It also came in at 0.4% month-over-month (MoM), above expectations of 0.3%.

Furthermore, the Core PCE came in at 3.0%, above expectations of 2.9%, while it came in at 0.4% MoM, above expectations of 0.3%. This marks the highest level for the Core PCE since November 2023. Notably, the January PCE inflation also came in above the November PCE data, which came in at 2.8% YoY.

The PCE data signals that inflation remains elevated in the U.S., which remains a concern for the Fed. The FOMC minutes showed that these Fed officials believe it is appropriate to hold rates steady, given that inflation is still well above their 2% target. Some of these Fed officials also signaled that they may support a rate hike if inflation remains elevated.

The BTC price dropped below $67,000 on the back of the release of the December PCE inflation data, as it suggests that the market is unlikely to get a rate cut anytime soon. TradingView data shows that the leading crypto is currently trading at around $66,700 at the time of writing.

Bitcoin is also facing downward pressure due to the Q4 GDP data, which came in at 1.4%, way below expectations of 2.8% and the 4.4% recorded previously. This suggests that the U.S. economy is weak, which is bearish for BTC and the broader crypto market.

Why The Data Should Not Be “Overly” Concerning

Market commentator The Milk Road suggested that the PCE inflation and GDP data should not be overly concerning because the main driver behind the slowdown was the government shutdown. They noted that on a wider timescale, the broader picture still looks solid.

Meanwhile, The Milk Road stated that momentum still appears to be ticking higher after the tariff-driven growth scare in the fourth quarter of last year. It is worth noting that the January CPI data, which dropped last week, came in at 2.4%, which marked a positive.

The market commentator added that as long as shutdown disruptions don’t become a pattern, they expect the U.S. economy to continue to expand. U.S. President Donald Trump also attributed the slowdown in the GDP to last year’s shutdown while also calling on Fed Chair Jerome Powell to lower interest rates.

The Fed is expected to hold rates steady at the March FOMC meeting amid concerns over rising inflation. CME FedWatch data shows a 96% chance the Fed will hold rates steady, while there is only a 4% chance the Fed will lower rates by 25 basis points (bps).