• The U.S. Bureau of Economic Analysis reported that the Personal Consumption Expenditure (PCE) Price Index increased by 0.6% in January, up 4.7% compared to a year ago, potentially impacting the crypto market.
• The Fed reportedly prefers the PCE over the Consumer Price Index (CPI) to gauge inflation, as it tracks how price changes influence spending behavior and accounts for price changes in rural or remote settings better than CPI does.
• U.S. equities markets closed in the red on Friday and Bitcoin dropped below $24K as bearish sentiment swept across both markets; if the Fed takes a hawkish stance due to high inflation rate in March, recent uptrend momentum could be slowed and gains seen in past two months corrected.
This article discusses the potential impact of an increase in inflation on the crypto market due to a rise in Personal Consumption Expenditure (PCE) Price Index reported by U.S.’s Bureau of Economic Analysis (BEA). It also looks at how Federal Reserve’s preference for PCE over Consumer Price Index (CPI) affects this scenario, followed by analysis of U.S equity and crypto markets performance after release of PCE data and what March holds for crypto investors with respect to this news update.
The Rise In Inflation
According to BEA, PCE Price Index rose by 0.6%, up 4.7% from a year ago which could push the Federal Reserve into considering further hikes on rates – confirming higher-for-longer rate narrative that spread market uncertainty recently.
Why Is PCE A Big Trigger For Crypto?
Federal Reserve reportedly prefers PCE over CPI as it has broader scope and ability to gauge economy’s strength better than CPI does; additionally it tracks how price changes influence spending behavior and also accounts for price variations across households or remote settings unlike CPI which doesn’t factor these differences into consideration while gauging inflation levels
U S Equities & Crypto Market Performance
US equities markets closed down 1st day post-release of PCE data while cryptocurrency market saw BTC drop below $24K with overall crypto market cap falling 3%.
What Does March Hold For Crypto?
If Federal Reserve takes hawkish stance due to high inflation rate recorded in January during its next meeting scheduled for March, recent uptrend momentum could be slowed down with most gains seen in past two months wiped off; breaking below $23K psychological level would confirm this scenario according to experts