US Inflation Ticks Up Again—What It Means for Markets
The latest inflation numbers are in, and they’re not exactly what the Federal Reserve wanted to see. According to Friday’s report from the Bureau of Economic Analysis, the headline Personal Consumption Expenditures (PCE) inflation rate climbed to 2.3% year-over-year, up slightly from April’s revised 2.2%. Core PCE, which strips out food and energy prices, also inched higher to 2.7% after two months of declines.
Not a huge jump, but enough to keep the Fed on edge. Month-over-month, both headline and core PCE rose by 0.1% and 0.2%, respectively—nothing dramatic, but still a reminder that inflation isn’t quite ready to settle down.
Wall Street Saw This Coming
Economists weren’t exactly blindsided. Nick Timiraos from the *Wall Street Journal* noted that many had expected another “cool” reading, but the actual numbers came in just a hair above predictions. Big banks like Goldman Sachs and Morgan Stanley had pegged headline PCE at 2.3% and core at 2.6%, so the slight overshoot wasn’t a shock.
What’s driving the stubbornness? Tariffs, mostly. Fed Chair Jerome Powell has pointed to them repeatedly as a factor keeping prices elevated. And with global tensions still simmering—especially in the Middle East—there’s not much relief in sight.
Fed Rate Cuts? Don’t Hold Your Breath
Powell and other Fed officials have been pretty clear: they’re in no rush to cut rates. Some had hoped for a move in September, and the CME FedWatch Tool still shows a 71% chance of that happening. But with inflation creeping up again, those bets might be too optimistic.
That said, markets are still pricing in about 75 basis points of cuts by year-end—*if* things don’t get worse. It’s a big “if.”
Bitcoin Takes a Small Hit
Crypto markets didn’t love the news. Bitcoin dipped below $107K shortly after the report, hovering around $106,700 at last check. Trading volume dropped by 15%, which isn’t unusual when uncertainty flares up.
Analysts are split on what comes next. Michael van de Poppe thinks BTC might consolidate for a bit before another leg up. But Daan Crypto Trades flagged some large liquidation clusters near current prices, warning that short-term traders could get squeezed if volatility spikes.
For now, it seems like the bigger players are treating dips as buying opportunities. But with inflation still sticky, everyone’s watching the Fed’s next move—or lack thereof.
