Hot PCE, New Fed Chair Keep Bitcoin Stuck
April PCE rose 3.8% YoY (core 3.3%), raising odds the Fed under chair Kevin Warsh will hold rates; Bitcoin slipped toward $73,300 amid heavy ETF outflows.
The Personal Consumption Expenditures price index rose 3.8% year-over-year in April, with core PCE at 3.3%. The monthly core reading was 0.2%, below economists’ 0.3% estimate. Kevin Warsh became Federal Reserve chair on May 22.
Markets priced a 98.9% probability that the Fed will keep its target rate at 3.50%–3.75% at the June 17 meeting. Bitcoin fell to about $73,300 in the hours after the report and traded near $73,000 through the weekend, roughly 30% below its level a year earlier.
The PCE measure covers a broader set of household spending than the Consumer Price Index and is the Federal Reserve’s preferred inflation gauge, so its readings influence expectations for interest-rate policy.
Spot Bitcoin exchange-traded funds experienced significant withdrawals. On May 28 funds recorded a ninth consecutive day of net outflows, losing $229 million that day; BlackRock’s IBIT accounted for about $178 million of that outflow. Over the prior two weeks, roughly $2.7 billion left Bitcoin and Ethereum products. Morgan Stanley launched its MSBT fund in April.
Traders are watching three indicators for direction: the dollar’s level, Treasury yields and spot Bitcoin ETF flows. A weaker dollar or falling yields could ease pressure on crypto, while a stronger dollar or rising yields could reduce demand for assets that do not pay income.
Energy costs are a factor for future inflation. Tensions near the Strait of Hormuz have helped keep oil prices elevated, which can add upward pressure to consumer prices. The next Personal Income and Outlays report, covering May, is due June 25.
Household finances showed strain in April: real disposable income fell 0.5% for a second month and the personal saving rate was about 2.6%.
Ellen Zentner, Morgan Stanley economist, said, “Rising prices are now taking a real bite out of consumption,” and added that households are dipping into savings to sustain spending.
Bitcoin has traded in a narrow range as market participants assess incoming data and institutional fund flows.
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