US Core PCE Eases to 3.0% in February, Leaving Fed Rate-Cut Outlook Neutral

The Federal Reserve regards the Personal Consumption Expenditures price index as a key inflation gauge, and its trajectory directly affects the timing of rate cuts and expectations for U.S. dollar interest rates. Higher-for-longer rates increase funding costs and depress valuations for non-yielding risk assets such as bitcoin, making monthly PCE readings a major focus for the crypto market.

U.S. PCE inflation rose to 3.5% year on year in March, driven mainly by higher energy prices. The reading matched market expectations but showed that inflation was rebounding. The data weakened the case for an early Fed rate cut, potentially prompting markets to reassess the timing of the first reduction and leaving cryptocurrencies and other risk assets under continued pressure from interest rates and valuations.

The US Commerce Department's personal consumption expenditures (PCE) price index is a key gauge the Federal Reserve uses to assess inflation and set interest-rate policy. Core PCE excludes volatile food and energy prices. A renewed rise in inflation would leave less room for rate cuts, while Bitcoin could swing as expectations shift for the dollar, bond yields and funding costs.

Markets expect the annual core PCE rate for January to rise to 3.1%, its biggest increase since April 2024. A reading in line with or above expectations could further reduce the likelihood of a Fed rate cut in June. Bitcoin has recently risen alongside cryptocurrencies and US stocks, renewing market focus on the $74,000 level, but shifting rate expectations continue to amplify short-term volatility.