Bitcoin pulled back to around $83,000 on Wednesday after briefly climbing above $87,000, as traders digested fresh inflation data and dovish signals from the Federal Reserve. The move came after New York Fed President John Williams said policymakers saw “no urgency” for another interest rate step, helping push the market-implied probability of an October rate hike from roughly 70% on Monday to below 50% before the data release.
The Commerce Department reported that the personal consumption expenditures price index rose 0.3% in August from the previous month, putting the annual increase at 3.4%. Economists had expected monthly and annual gains of 0.3% and 3.7%, respectively. The core PCE index, which excludes food and energy and is closely watched by policymakers, rose 0.2% monthly and 3.0% annually, compared with forecasts of 0.3% and 3.3%. Preliminary readings noted by market participants also showed the core annual metric coming in below the expected 3.39%, while the previous core annual level was 2.9%.
Energy remained a key driver of price pressures. Gasoline prices climbed 4.4%, transportation services rose 1.4%, and energy goods and services overall increased 2.3% during the month. At the same time, consumer spending remained resilient: personal income increased 0.2% and spending advanced 0.9%, slightly below income forecasts but above spending expectations. Separate data showed the U.S. economy grew at a 2.2% annualized pace in the second quarter, revised up from 1.5%, while ADP private payrolls rose by 90,000 in September, above the 70,000 consensus.
Although both inflation measures came in below forecasts, they remain well above the Federal Reserve’s 2% target, continuing a multiyear stretch of elevated price pressures. Financial markets initially responded positively to the softer inflation figures. S&P 500 and Nasdaq futures were up about 0.3%, while the 10-year Treasury yield retreated to 5.23% after touching its highest level since 2007. Despite this, Bitcoin failed to hold its earlier gains, highlighting the uncertainty surrounding the Fed’s October 28 policy decision. Investors now turn to Friday’s official employment report and upcoming inflation data for further clues on monetary policy direction.
