The cryptocurrency markets are considerably influenced by the Federal Reserve’s interest rate decisions, with a new decision expected on January 28. Recent employment figures for December exceeded expectations, and given last month’s forecast by the Fed allowing only a maximum of two cuts in 2026, an interest rate cut is unlikely. As a result, the PCE data is not anticipated to impact the interest rate decision, but it is crucial for understanding inflation trends.
U.S. Inflation Data
The inflation indicator monitored by the Fed has just been released. The GDP data surpassed forecasts today, shaking expectations for the Fed’s planned rate cuts in 2026. Hawkish members of the Fed may oppose rate cuts, as the economy is growing, and employment is recovering. For interest rates to drop, inflation must closely approach 2% over several months. Thus, today’s PCE data meeting expectations would hold little significance for the crypto market.
– U.S. PCE Announced: 2.8% (Expectation and Previous: 2.8%) – U.S. PCE Monthly Announced: 0.2% (Expectation: 0.2% Previous: 0.3%)
Figures aligning with expectations caused a slight increase in BTC prices. Numbers below 3% are considered positive, and avoiding a sharp inflation rise due to tariffs is favorable. This scenario suggests an elevated possibility of a soft landing, confirming that interest rates may not be reduced as quickly as Trump desires. Even with a new Fed chair taking over in May, the current data could deter any rate cuts by him.
If the data prevents a rate cut and the cut is still implemented, the Fed’s independence could be called into question, possibly triggering a market downturn. Either employment needs to worsen, or inflation must decline more swiftly. Otherwise, rapid interest rate cuts could be challenging in 2026.
