The U.S. Bureau of Economic Analysis released the March Personal Consumption Expenditures (PCE) price index on Friday, showing headline PCE jumped to 3.5% year-over-year from 2.8% in February, while core PCE rose to 3.2% from 3.0%, both in line with market expectations. The data deals another blow to Federal Reserve rate cut hopes, keeping risk assets like cryptocurrencies and equities under pressure.
Energy Prices Fuel Headline PCE Surge to 3.5%
Month-over-month, headline PCE rose 0.7% (vs. 0.4% prior), driven primarily by a sharp increase in global energy prices, according to the BEA report. Core PCE, which excludes volatile food and energy categories, edged up 0.3% month-over-month (down from 0.4%), but the annual rate crept up to 3.2%, indicating persistent underlying inflation.
Consumer Spending and Income Both Rise, Supporting Inflation
Beyond price gains, nominal personal consumption expenditures increased by $195.4 billion in March, up 0.9% month-over-month. After adjusting for inflation, real PCE still grew 0.2%. Personal income and disposable income both rose 0.6%, while the personal saving rate stood at 3.6%. Strong consumer momentum continues to provide support for inflation.
Rate Cut Hopes Crushed, Crypto Market Feels the Heat
The PCE release comes just one day after the Fed's April FOMC meeting. Fed Chair Jerome Powell had already cited “soaring energy” as a key factor keeping rates at 3.50%-3.75%. The March data fully validates those concerns, effectively dashing the market’s hopes for an early rate cut. In the near term, risk assets including cryptocurrencies and equities face continued valuation pressure in the high-rate environment. Bitcoin has already slipped below the $90,000 mark amid rising Treasury yields.