Fed’s Favorite Inflation Gauge Hits Target: Rate Cut In October?

TLDR:

• Rate cut bets jumped to 87.7% after PCE data hit forecasts, boosting confidence that easing could come as early as October.
• Core PCE held steady at 2.9%, showing no fresh price acceleration and keeping the Fed’s inflation target within reach.
• Consumer spending stayed balanced, giving policymakers room to ease without risking renewed inflation pressure.
• Crypto traders expect added liquidity and stronger Q4 price action if the Fed confirms its shift next month.

Markets now have the numbers they were waiting for. The Fed’s preferred inflation gauge came in exactly as expected. That keeps things steady. No surprises. And that’s exactly what traders wanted to see heading into October.

The Personal Consumption Expenditures (PCE) report shows inflation holding firm, not running hotter. That’s key for the Federal Reserve. The data helps shape whether they pull the trigger on a rate cut next month. Crypto investors are watching closely.

With prices stable, traders see the door still open for easing. The market mood turned slightly more confident. Rate cut odds ticked higher. Liquidity could be back on the table before the end of the year.

This data lands at a crucial time. The next Fed decision is weeks away. Every number matters, and this one just gave risk assets a little breathing room.

PCE Inflation Data Matches Expectations

Bull Theory reported that PCE inflation rose 2.7% year-over-year, right in line with forecasts. Core PCE, the Fed’s more precise measure, printed at 2.9%, also matching expectations. On a monthly basis, the number climbed 0.2%, with no surprises there either.

The report points to stable prices without fresh upward pressure. That means tariffs, which have been in place for months, are not driving costs higher. For traders, that’s a positive. It removes one potential reason for the Fed to stay restrictive.

Consumer spending stayed balanced as well, neither overheated nor falling sharply. That’s the sweet spot policymakers look for when gauging whether to ease. Demand remains solid, but not enough to push inflation higher.

This sets a foundation for the October decision. The Fed has repeatedly said it wants clear evidence before shifting policy. This data checks another box.

Crypto Market Eyes October Rate Cut

Markets reacted quickly to the report. According to data from CME FedWatch, the probability of a rate cut in October moved from 85.5% to 87.7% after the release. That slight rise shows traders leaning into a pivot next month.

Crypto markets tend to benefit when rates fall. Lower rates usually mean more capital flowing into risk assets. If the Fed signals easing, it could encourage more traders to rotate back into crypto.

Liquidity conditions often shape price action. More money in the system supports buying power. For Bitcoin and Ethereum, that could mean renewed upside momentum as Q4 begins.

Still, traders will keep watching incoming data. The next few weeks will be critical as labor reports and Fed commentary shape final expectations.

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