- Lowered rate cut odds impact funding dynamics and risk assets.
- Jerome Powell remains cautious on policy changes.
- Hot PCE data shows no inflation improvement.
Traders have reduced predictions for a Federal Reserve rate cut in September following stagnant PCE inflation data, impacting expectations for U.S. monetary policy and financial markets.
The unchanged inflation leads to cautious market sentiment, affecting cryptocurrency inflows with decreased risk appetite among investors due to anticipated stable monetary conditions.
The odds of a September 2025 Federal Reserve rate cut were reduced after the PCE inflation data showed no improvement. This shift has been keenly observed by market players and could affect various financial dynamics.
Jerome Powell, the Federal Reserve Chair, illustrates a cautious approach amid pressure for lower rates. President Trump’s calls for reduced rates aim to stimulate economic growth, yet no immediate policy change is expected.
The reduced probability of a rate cut has affected the expectations for looser financial conditions. This may affect institutional allocations into risk assets such as cryptocurrencies in the near term.
The financial implications involve risk assets like BTC and ETH, that are sensitive to macro policy changes. Lower odds of a rate cut usually result in short-term crypto outflows and higher dollar strength.
Historically, similar macro surprises such as unexpected “hot” PCE data have influenced risk-asset price actions. This continues the trend of cautious market reactions to policy shifts from the Federal Reserve.
Financial and regulatory outcomes can be influenced by PCE data, with past patterns showing increased caution. No direct on-chain changes, but potential liquidity shifts might follow similar historical patterns, reflecting a complex market impact.
Core PCE inflation at 2.8% YoY as of June 2025, showing ‘no improvement versus the 2024 average,’ which decreases policy room for cuts: Morningstar
