Key facts
- Wall Street banks have raised forecasts for August core PCE inflation.
- Barclays now expects monthly core PCE inflation at 0.25%.
- Goldman Sachs forecasts monthly core PCE inflation at 0.26%.
- Nomura's revised forecast for monthly core PCE inflation is 0.278%.
- Bank of America anticipates a 0.30% monthly increase in core PCE.
- TD Securities estimates monthly core PCE inflation at 0.32%.
Wall Street banks have increased their forecasts for August core PCE inflation, signaling persistent inflationary pressures and fueling expectations of a potential Federal Reserve rate hike at its September meeting. Barclays now anticipates monthly core PCE inflation at 0.25%, up from 0.22%, while Goldman Sachs revised its forecast to approximately 0.26% from 0.24%. Nomura raised its projection from 0.245% to about 0.278%, and Bank of America expects a 0.30% monthly increase, up from 0.26%. TD Securities has a higher estimate of 0.32%, an increase from its prior forecast of 0.24%.
These revised predictions suggest that inflation may remain 'sticky' despite previous indications of cooling, which could prompt the Fed to maintain a cautious stance on easing financial conditions. The core PCE index is closely watched by the central bank as a measure of underlying inflation, excluding volatile food and energy prices. Stronger readings could complicate the Fed's policy decisions and increase the likelihood of a rate hike.
The crypto market is particularly sensitive to these macroeconomic developments, as higher policy rates generally create more challenging conditions for risk assets like cryptocurrencies. Bitcoin and other digital assets could experience increased volatility if the Fed opts for a rate hike or adopts a hawkish outlook. According to the CME FedWatch Tool, the probability of a 25 basis point rate hike in September currently stands at 87.3%, with prediction markets showing an 80% likelihood. The European Central Bank's recent 25 bps rate hike also contributes to market jitters.