Crypto Market Awaits US PCE Data as Odds of 3 Fed Rate Hikes Spook Investors

The cryptocurrency market is bracing for potential volatility ahead of the release of US Personal Consumption Expenditures (PCE) inflation data, amid growing expectations of multiple Federal Reserve rate hikes this year. Market participants are closely watching the data, scheduled for release on June 24, for cues on economic health and the Fed’s next policy moves.

According to market estimates, US PCE inflation is expected to rise 0.5% month-over-month in May, following a 0.4% increase in April. On an annual basis, the headline PCE is forecast to hit 4.1%, up from 3.8% the previous month. Core PCE, which excludes volatile food and energy prices, is expected to climb 0.3% monthly and 3.4% year-over-year. Should the actual readings exceed these already elevated estimates, it could intensify fears of aggressive Fed tightening and weigh on risk assets like cryptocurrencies.

The market is increasingly pricing in the possibility of three rate hikes this year, a shift driven by resilient economic data and a hawkish tone from new Fed Chair Kevin Warsh. Bank of America recently revised its forecast to predict three rate increases in 2026, reversing its earlier expectation of no policy changes. This marks a significant tightening of monetary policy expectations.

Prediction markets reflect lingering uncertainty over the Fed’s near-term trajectory. Data from Kalshi indicates a 25% probability of a rate hike in July, compared to a 76% chance of a pause and a 2% likelihood of a cut. Meanwhile, the CME FedWatch Tool shows a 51.9% probability of a 25-basis-point rate increase at the Fed’s September meeting.

Historically, higher interest rates have dampened investor appetite for riskier assets such as cryptocurrencies. The prospect of tighter monetary policy has already pressured Bitcoin and other digital assets, with the market navigating a mix of geopolitical tensions and macroeconomic uncertainty. Investors will now scrutinize the upcoming PCE data for signals on whether the Fed will follow through with its hawkish stance or adopt a more cautious approach.

Source: https://coingape.com/crypto-market-awaits-us-pce-data-as-odds-of-3-fed-rate-hikes-spook-investors/