US Inflation (PCE): Bitcoin Bounces Back, but the Fed Remains Cautious

A little less inflation, much more consumption. The US PCE index rose less than expected in August, while household spending recorded its largest real increase since March 2025. This mix supported stocks and Bitcoin, without erasing questions about the Federal Reserve's next decision.

Key points of this article:

• The US PCE index rose less than expected in August, while household spending reached its largest real increase since March 2025.

• Despite the slowdown in core inflation, markets rebounded, led by Bitcoin, while maintaining questions about the Federal Reserve's upcoming decisions.

Core PCE Slows, but US Consumption Accelerates

The PCE price index, the inflation measure favored by the Federal Reserve, increased by 0.3% in August and 3.4% year-on-year. The Reuters consensus expected a monthly increase of 0.4% and an annual rate close to 3.7%.

Excluding food and energy, the Core PCE rose by 0.2%, compared to the expected 0.3%. Its annual rate falls to 3%, notably due to annual statistical revisions made by the Bureau of Economic Analysis. Thus, core inflation is slowing more than expected but is still far from the Fed's 2% target.

However, the report does not describe an economy losing momentum. Consumer spending increased by 0.9%, while its inflation-adjusted growth reached 0.6%, its highest level since March 2025. At the same time, personal incomes only gained 0.2%, and the savings rate fell to 4.1%.

Households continue to support activity despite rising prices and financing costs. This resilience reduces the risk of recession, but it may also sustain inflationary pressures if demand remains persistently above income growth. The inflation figures for August have just been released -- Source: Compte X JDC

Stocks and Bitcoin Bounce Back, the Fed Keeps Its Options Open

The initial market reaction was positive. Futures on major US indices extended their gains after the release, with the Core PCE lower than expected reducing the likelihood of a new rate hike as soon as October.

Bitcoin also rose to around $84,800, after trading around $83,000 to $84,000 before the report. The decline in monetary fears benefits cryptocurrencies, as lower rates reduce the relative appeal of risk-free investments and facilitate the return of capital to more volatile assets.

However, the room for maneuver remains limited. The 10-year Treasury yield is still above 5.2%, near its highest level since 2007. These high yields weigh on tech stocks, crypto markets, and all assets whose valuation heavily depends on financial conditions.

Moreover, such strong consumption does not argue for a rapid easing. The Fed may hold back on the slowdown of the Core PCE to temporize in October while maintaining a restrictive policy in the face of overall inflation still above 3%. Thus, the August figures provide a respite for the markets without closing the debate on rates.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.