Inflation Data Overview
The latest inflation data from the Bureau of Economic Analysis shows that the Personal Consumption Expenditures (PCE) price index rose to 2.8% year‑over‑year in September, matching market expectations. Core PCE, the Federal Reserve’s preferred measure of inflation, came in slightly lower at 2.8%, down from 2.9% in August.
September PCE Details
The Bureau of Economic Analysis released the long‑awaited September PCE inflation data on December 5, showing a year‑over‑year increase of 2.8%, in line with market expectations and up from 2.7% in August. Core PCE, which excludes volatile food and energy prices, also came in at 2.8%, down from 2.9% in August and slightly better than the forecast of 2.9%.
Bitcoin’s Reaction
Bitcoin prices remained stable around $92,000 following the release, as traders await the Fed’s next move on interest rates. The technical setup shows resistance at $93,000 and a descending trendline that has capped rallies since November 11, while support holds at $92,000. The total crypto market cap is currently at $3.1 trillion.
Alternative Real‑Time Inflation Data
Alternative data provider Truflation reported that their real‑time PCE index stands at just 2.13%, with core PCE at 2.6%, based on millions of actual purchase data points rather than surveyed prices. This gap underscores the challenge for Fed Chair Jerome Powell, as the September data is already two months old and may not reflect current economic conditions.
Fed Signals & Labor Market
The Fed is facing mixed signals. While core PCE is showing signs of cooling, headline inflation remains above the Fed’s 2% target. Recent jobless claims data came in stronger than expected at 191 K, suggesting unexpected resilience in the labor market. Markets are weighing whether the improving core inflation and the end of quantitative tightening (QT) justify a rate cut, or if the robust labor market argues for a more cautious approach.
Equity Market Reaction
The S&P 500 surged 0.5% on the news of the softer‑than‑expected core PCE figure, adding $3.3 trillion since the November 21 low. However, Bitcoin briefly dipped below $90,000 even as other equity markets rallied on the inflation relief, highlighting the unique dynamics in the crypto market.
Expert Commentary
Professor Steve Hanke of Johns Hopkins noted that the M2 money supply is growing at just 4.5% year‑over‑year, below his “Golden Growth Rate” of around 6.3%, which is consistent with hitting the Fed’s 2% inflation target. This suggests that the Fed may have room to ease policy without risking renewed inflation pressures.
Outlook Ahead of the FOMC
As the market digests these mixed signals, all eyes are on the upcoming FOMC meeting on December 9‑10. With core PCE moving in the right direction but still above target, a December rate cut seems probable but not guaranteed. The Fed’s decision will likely hinge on whether they view the resilient labor market as a sign that the economy doesn’t need additional stimulus.
