Coin World reported:
The US Department of Commerce released the May PCE data yesterday (28th), showing a slowdown in inflation, further strengthening the market’s bet on the Fed starting rate cuts in September. The US stock market collectively rose slightly, while Bitcoin struggled to stop its downward trend.
Following the earlier release of May CPI data and retail sales data in the US showing a cooling of inflation, the Department of Commerce announced another important inflation measure on the 28th, namely the May PCE (Personal Consumption Expenditures Price Index) data, showing a slowdown in inflation. Specifically:
The overall PCE in May remained unchanged from the previous month, with a 0.3% increase in April; compared to the same period last year, it increased by 2.6%, with a year-on-year increase of 2.7% in April. This aligns with market expectations.
Excluding the volatile food and energy prices, the core PCE in May increased by 0.1%, revised up from 0.2% in April. The year-on-year core PCE growth remained at 2.8% for three consecutive months but slowed to 2.6% in May, marking the smallest increase since March 2021.
Experts believe the Fed is likely to start cutting rates in September. Since July last year, the Fed has frozen the federal funds rate in the range of 5.25% to 5.5%. Despite previous hawkish statements from Fed officials, suggesting at most one rate cut this year, recent inflation data has raised market confidence, indicating the possibility of the Fed starting rate cuts in September and two rate cuts this year.
Beth Ann Bovino, Chief Economist at Bank of America, commented on the PCE data released yesterday:
We do expect the real economy to soften, but not plummet, just soften, which means inflation will also slow down in the future. This gives us reason to believe that the Fed may start cutting rates in September.
We all know it depends on the data; the Fed is still watching. Are they still waiting? Will there only be one cut this year? I can’t rule out that possibility, but the data seems to provide the Fed with reasons to cut rates twice this year.
According to the CME Group’s Fed Watch tool, the current market also leans towards the Fed starting rate cuts in September, with a probability of 59.5%, while the probability of the Fed maintaining the rate in September is only 34.1%.
As for the rate in December, the market expects a 44% probability of a second rate cut by the Fed in December, with a 30.4% chance that the Fed will maintain the current rate level in December.
US Stocks Rise Together:
After the PCE news was released, the four major US stock indices all saw increases, with the Philadelphia Semiconductor Index posting the highest gain:
– Dow Jones Industrial Average: Up 0.12% or 45.03 points, at 39,209.25
– S&P 500 Index: Up 0.11% or 6.26 points, at 5,489.28
– Nasdaq Index: Up 0.028% or 5.08 points, at 17,862.32
– Philadelphia Semiconductor Index: Up 1.39% or 75.37 points, at 5,496.47
Bitcoin Falls to $61,000:
In the crypto market, despite the PCE news failing to halt Bitcoin’s recent decline, BTC even experienced a slight drop. Coupled with the SEC’s announcement of lawsuits against Consensys and claims that staking projects like Lido are securities, intensifying the market downturn, Bitcoin briefly fell below $61,000. At the time of writing, Bitcoin is at $60,795, but its trend remains uncertain.
Ethereum follows a similar trend, falling below $3,400 at the time of writing, at $3,386.