The publication of the personal consumption expenditure (PCE) price index in the United States this morning has raised expectations of greater liquidity for the markets. This is something that is positive for bitcoin (BTC) and cryptocurrencies.
The annual PCE fell from 2.5% to 2.2%which is 0.1% below expectations. With this result, it marked its lowest level in more than three years since 2021. In addition, the core PCE, which excludes two very volatile components (food and energy) to give a more accurate perspective, rose from 2.6% to 2.7 % in line with expectations.
In other words, “good numbers for bitcoin and risk markets,” resume the analyst Juan Rodríguez. In part, this is because lower inflation allows more capital to enter into investment. Furthermore, such a scenario calms fears of recession and facilitates the flexibility of monetary policy.
“Lower inflation data supports another 50 basis point interest rate cut in November,” stands out In this regard, Jesse Cohen, global markets analyst at the data platform Investing. It is in such a month that the next decision on monetary policy in the United States is made.
Given the result of the PCE, Expectations for a cut of 25 basis points for November dropped to 48% and those of 50 basis points rose to 52%. This is what the data indicates polled by CME Group, as shown below.
The PCE is the favorite measure of the Federal Reserve (Fed), Central Bank of the United States, to establish monetary policy, since it is based on the inflation of products and services consumed by households, instead of select elements such as the index of consumer prices (CPI). Therefore, its result is key for the size and pace of the next interest rate cuts.
Currently, rates in the economic powerhouse are between 475 and 500 basis points. This is since last week’s 50 basis point cut, which was the first in more than four years. In this way, with such monetary policy, liquidity in the economy has increased, boosting the markets in general.
Gold and the S&P 500 (SPX), an index that compiles the shares of the main 500 companies listed in the United States, reached new all-time high prices yesterday. While, bitcoin has also been motivated upwardsalthough it is still within the lateral period that it has been in for six months after having hit a price record, as the graph shows.
Bitcoin breaks key resistance to regain momentum
Growing idea of another 50 basis point cut by November “is bullish for bitcoin,” holds the trader known as Satoshi Flipper. “There is simply nothing bearish about a better-than-expected PCE inflation reading,” add.
Besides, China has also cut rates and the global money supply is growing. With this panorama, consider the trader that it is time to leave behind the consolidation channel that bitcoin has been carrying in recent months below its all-time high price.
In line with this perspective, the price of bitcoin today exceeded $66,000 (USD), strongly breaking the downward trend that had been registering increasingly lower highs. In addition, exchange-traded funds (ETFs) of the currency yesterday recorded their largest inflow in more than two months, which exhibits an optimistic outlook.
The PCE report “keeps alive hopes of a 50 basis point cut in November, but payrolls remain the key to the future,” warns on the other hand the analyst Ole S. Hansen. The reason for this is that, if the cooling of the labor market continues, it will fuel fears of recession.
Therefore, the next emerging data on economic development may generate high volatility. In the event of new recessionary alarms, the demand for short-term risk could be discouraged, while that of assets considered long-term refuges may be strengthened.
