Wall Street Banks Fuel Crypto Market Concerns with Higher US PCE Inflation Forecasts
The crypto market is bracing for a potential Federal Reserve rate hike in September as Wall Street banks have raised their forecasts for US PCE inflation. According to recent data, Barclays now expects monthly US core PCE inflation near 0.25%, up from its previous expectations of 0.22%. Goldman Sachs sees the figure at roughly 0.26%, while Nomura raised its projection from 0.245% to about 0.278%. Bank of America now expects a 0.30% monthly increase in August, up from its pre-CPI forecast of 0.26%.
The strong readings could complicate the Fed's policy choices and raise bets over a potential rate hike in September. Crypto market traders are closely watching these inflation expectations, as higher policy rates generally create tougher conditions for risk assets. Bitcoin and other cryptocurrencies could face additional volatility if the Fed considers a rate hike in September or delivers a hawkish outlook.
The European Central Bank (ECB) also announced a 25 bps rate hike recently to curb inflation, which has further spooked crypto market traders. The odds of a potential 25 bps rate hike in September now sit at 87.3%, according to the CME FedWatch Tool. Prediction markets data also showed that a Fed rate hike odds in September is at 80%.