U.S. PCE Inflation Rises to 3-Year High, Bitcoin Slides

U.S. PCE inflation has risen to a three-year high as the U.S.-Iran war continues to drive up prices. Bitcoin fell on the back of this data release, as crypto traders continue to price in the possibility that the Fed will hold rates steady this year amid inflation concerns.

PCE Inflation Hits 3-Year High As Bitcoin Extends Decline

The latest Bureau of Economic Analysis release shows that the March PCE price index rose 3.5% year-over-year (YoY) and 0.7% month-over-month (MoM), both in line with expectations. However,  the PCE inflation, which is the Fed’s preferred inflation gauge, is now at its highest level since August 2023.

Meanwhile, the core PCE inflation rose 3.2% YoY and 0.3% MoM, both in line with expectations. The core PCE inflation is now at its highest level since November 2023 as the Iran war pressures oil prices. Bitcoin notably slid following the data release, dropping to around $76,000.

The BTC price is currently trading at around $76,400, up on the day, according to TradingView data. However, the leading crypto is still under pressure as U.S. President Donald Trump rejected Iran’s latest offer to reopen the Strait of Hormuz, sparking concerns that the U.S.-Iran war could escalate again.

Source: TradingView; Bitcoin daily chart

Oil prices are also rising, with Brent crude oil rising above $120 per barrel yesterday, which is also weighing on Bitcoin’s price. The market is also still assessing yesterday’s Fed decision and its implications for liquidity going forward.

As CoinGape reported, the Fed left interest rates unchanged, citing uncertainty caused by the U.S.-Iran war. The Fed stated that inflation is elevated, with data such as the PCE inflation likely to strengthen their case for holding rates steady for the third consecutive meeting.

Crypto Traders Bet Against Rate Cuts This Year

Crypto traders are again betting on zero rate cuts this year following yesterday’s FOMC meeting and the PCE inflation release. Polymarket data show that there is now a 58% chance the Fed will make zero rate cuts this year, up from as low as 39% just two days ago.

Source: Polymarket

The possibility of the Fed holding rates steady or even making a hike this year is bearish for Bitcoin and the broader crypto market. The BTC price historically rallied to new highs last year as the market priced in the three rate cuts that the Fed made.

The market is notably pricing in zero rate cuts this year, even though Kevin Warsh is on course to become the next Fed chair, replacing Jerome Powell. However, Powell revealed that he won’t step down from the Fed board just yet, meaning Trump is unlikely to get a majority for now to push for rate cuts.