Key Takeaways
Bitcoin (BTC) fell on Thursday after the U.S. Personal Consumption Expenditures (PCE) price index for March came in hotter than expected, reinforcing concerns that the Federal Reserve will keep interest rates elevated for longer.
"While ‘stubborn’ isn’t the same as ‘resurgent,’ as long as oil prices remain near their four-year highs, inflation will remain front of mind in the markets and keep the Fed on the sidelines," Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, said in a note.
The Bureau of Economic Analysis report on April 30 showed the headline PCE index rose 3.5 percent from a year ago, a notable acceleration from the 2.8 percent seen in February and the highest in nearly three years. The core PCE index, which strips out volatile food and energy costs, also remained high at 3.2 percent. The data follows a separate report showing U.S. GDP growth, while positive at 2.0 percent, was slower than economists predicted.
The persistent inflation, driven in part by high energy costs resulting from the conflict in Iran, dampens any prospect of a near-term Fed rate cut. Following the data release, U.S. Treasury yields ticked higher, reflecting market expectations for a more hawkish central bank. This environment is typically challenging for risk assets like Bitcoin, which have benefited from the low-rate environment of previous years. The crypto market saw broad selling pressure, with Ethereum (ETH) also trading lower in correlation with Bitcoin.
This article is for informational purposes only and does not constitute investment advice.
