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Fed's Preferred Inflation Gauge Rises Less Than Expected, and Bitcoin Rises
BTC pops after U.S. PCE price index comes in slightly slower for September than predicted by economists.
Updated Oct 28, 2022, 5:48 p.m. Published Oct 28, 2022, 12:46 p.m.
Bitcoin got a quick boost early Friday after a U.S. government report showing that an inflation gauge closely monitored by the Federal Reserve rose slower than estimated last month.
The PCE (Personal Consumption Expenditures) Price Index increased 0.3% in September, slowing from August's 0.4% clip. The increase was also less than the 0.4% average estimate of economists in a FactSet survey.
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The price of bitcoin (BTC) jumped after the news, and was up to about $20,500, from about $20,100 just before the report.
Bitcoin, along with U.S. stocks and other assets seen as risky, has been moving recently on speculation over whether the Fed might soon let up in its campaign to bring down soaring inflation. The central bank has been tightening monetary policy to cool the economy in an effort to slow the pace of consumer-price rises – and higher interest rates tend to make risky assets less attractive.
Over the past 12 months, the PCE Index is up 6.2% – still well above the Fed's 2% target. The measure is produced by the U.S. Commerce Department's Bureau of Economic Analysis.
But traders might be encouraged by any signs of progress in bringing the number down, even incrementally.
Another inflation gauge, the Consumer Price Index, produced by the Labor Department's Bureau of Labor Statistics, is typically published a couple weeks prior to PCE every month and is much more closely watched by economists and the broader public.
The most recent CPI report, published Oct. 13, showed that the index unexpectedly rose faster than expected in September, at a rate of 8.2%, close to its highest level in four decades. Bitcoin's price fell after that report.
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Coinbase Sees Crypto Recovery Ahead as Liquidity Improves and Fed Rate Cut Odds Climb
The crypto exchange also took note of a so-called AI bubble that continues to go strong and a weaker U.S. dollar.
What to know:
- Coinbase Institutional is seeing a potential December recovery in crypto, citing improving liquidity and a shift in macroeconomic conditions that could favor risk assets like bitcoin.
- The firm's optimism is driven by rising odds of Federal Reserve rate cuts, with markets pricing in a 93% chance easing next week, and improving liquidity conditions.
- Several recent institutional developments, including Vanguard's crypto ETF policy reversal and Bank of America's greenlighting of crypto allocations, have contributed to bitcoin's rebound from recent lows.
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