The U.S. Personal Consumption Expenditures (PCE) price index — the Federal Reserve’s preferred inflation gauge — rose 3.8% year-over-year in April, its highest level since May 2023 and well above the Fed’s 2% target. The reading, released Thursday by the Bureau of Economic Analysis, intensifies pressure on central bank policy and ripples through risk assets including cryptocurrencies.
Core PCE, which strips out volatile food and energy costs, climbed to 3.3%, up from 3.2% in March and the highest since October 2023. On a monthly basis, prices increased 0.4%, slightly below expectations. The data was partly driven by higher oil prices linked to the Middle East conflict, which have fed into broader price pressures.
Fed officials are taking notice. Governor Lisa Cook said she is “prepared to raise rates” if inflation does not ease in a timely manner. Governor Chris Waller, previously one of the more dovish voices, now cites inflation — not the job market — as his bigger concern. Along with several other policymakers, Waller believes the next rate move could be either a cut or a hike, signaling a shift in tone. Vice Chair Philip Jefferson expects price pressures to fade later in the year but flagged upside risks from energy costs.
Bond markets are already repricing: the 2-year Treasury yield hovers around 4%, roughly 25 basis points above the Fed’s current target range, and markets are now factoring in at least one rate hike before year-end. For crypto, the macro backdrop is turning negative. Bitcoin and other digital assets tend to sell off on hot inflation prints as traders pare risk exposure in anticipation of tighter monetary conditions. Notably, Bitcoin ETFs recently saw more than $733 million in outflows, suggesting institutional repositioning ahead of macro uncertainty. A sustained period of above-target inflation could keep real yields attractive in traditional fixed income, diminishing the relative appeal of non-yielding assets like Bitcoin.
