Will Tomorrow’s PCE Inflation Data Be Positive For The Crypto Market?

The PCE inflation index report, scheduled for release tomorrow, has all the attention from crypto investors and traders. As a key metric used by the Federal Reserve to guide monetary policy decisions, Personal Consumption Expenditures data has historically influenced the crypto market

The upcoming March figures will be closely watched for signals about potential interest rate adjustments that could affect liquidity and investment flows across financial markets.

Projected PCE inflation for March

Market expectations for tomorrow’s PCE inflation report point to a potential cooling of inflationary pressures. According to data from MarketWatch, the core PCE inflation rate for March is projected to reach 2.6%. This would mark a decrease from February’s 2.8% reading. The February figure had previously shown an uptick from January’s 2.7% rate.

The headline PCE inflation, which includes food and energy prices, is expected to show an even more substantial decline. Year-over-year PCE inflation is forecast to come in at 2.2% for March, down from 2.5% in February.

These forecasts indicate inflation to be gradually inching its way toward the Federal Reserve’s preferred rate of 2%, but still higher. This deceleration in increases in prices follows months of mixed inflation reports, which have made it difficult for the Fed to act on interest rates.

The PCE inflation index is significant in that it is the Federal Reserve’s primary measure to gauge inflation. It provides a better overall view of price activity in the economy than the more widely recognized Consumer Price Index (CPI). The core PCE removes the volatile food and energy prices to provide a better view of the underlying inflation trend.

How would that affect the crypto market?

If the PCE inflation reading is 2.6% for core PCE and 2.2% for headline PCE, the crypto market and Bitcoin price could respond positively. Lower inflation readings would increase the chances that the Federal Reserve would opt for a more accommodative monetary policy. That would translate into interest rate reductions later in the year.

Lower interest rates benefit risk assets like cryptocurrencies in several ways. First, they reduce the attractiveness of return-generating investments like bonds and savings accounts. This could lead people to go into more risky, possibly higher-reward assets like Bitcoin and other cryptocurrencies. Second, a more policy-friendly monetary policy puts more money into the financial system. Also, some of that money may find its way into crypto markets.

If the market aligns with this trend, then Robert Kiyosaki’s $200k price prediction could prove to be true. When PCE numbers are lower than expected (lower than 2.6% for core PCE), they can catalyze an even more positive response in cryptocurrency markets. They would be supporting the argument of earlier and greater interest rate cuts by the Fed. Analyst Will Meade shared the same opinion and tweeted that a cooler-than-expected PCE inflation can cause a jump in stock prices. This could also prove to be positive for crypto prices.

Conversely, if inflation proves more persistent than anticipated and exceeds the 2.6% projection, it could have a cooling effect on cryptocurrency prices.