Major Wall Street institutions including JPMorgan, Goldman Sachs, UBS, Bank of America, and Morgan Stanley expect U.S. PCE inflation to remain elevated in the upcoming report, increasing concerns about further pressure on Bitcoin and other risk assets.
The Personal Consumption Expenditures (PCE) Price Index, which is the Federal Reserve’s preferred inflation gauge, is expected to show headline inflation reaching 3.8% year-over-year for April. Investors across stock, crypto, and commodity markets are closely watching the release for signals about future Federal Reserve interest rate decisions.
The U.S. Bureau of Economic Analysis is scheduled to publish the April PCE inflation report on May 28. Ahead of the release, financial markets have already turned cautious, with Bitcoin, stocks, and gold trading lower amid rising geopolitical tensions linked to the escalating U.S.-Iran conflict.
Wall Street analysts believe the inflation report could reinforce expectations that the Federal Reserve may maintain higher interest rates for longer. A hotter-than-expected inflation print could trigger additional selling pressure across risk assets, especially cryptocurrencies.
JPMorgan warned about potential upside surprises in inflation data, citing rising oil prices and continued pressure on goods prices. The bank projected monthly Core PCE inflation at 0.25%, slightly below the previous 0.3% reading.
Meanwhile, Goldman Sachs, Bank of America, UBS, and Morgan Stanley estimate headline PCE inflation increased between 0.43% and 0.45% month-over-month, while maintaining a 3.8% annual inflation forecast.
Most major banks also expect Core PCE inflation to rise between 0.27% and 0.30% on a monthly basis. On a yearly basis, Core PCE is projected to remain around 3.3%.
According to Wall Street Journal analyst Nick Timiraos, economists expect Core PCE inflation to rise 0.28% in April based on earlier CPI and PPI data. If confirmed, the six-month annualized inflation rate would climb to 3.8%, marking the highest level in nearly three years.
Economists broadly expect inflationary pressures to remain persistent despite slowing economic growth. Annual headline PCE inflation is projected to increase from March’s 3.5% reading to 3.8%, while monthly headline inflation is expected at 0.5%.
Federal Reserve official Neel Kashkari recently emphasized that reducing inflation remains the Fed’s top priority, noting that consumer prices continue to remain elevated despite a resilient labor market.
At the same time, markets are increasingly preparing for a more hawkish Federal Reserve stance under incoming Fed Chair Kevin Warsh. According to the CME FedWatch Tool, traders currently see more than a 40% probability of a 25-basis-point rate hike by December.
The uncertain macroeconomic environment has continued to weigh on Bitcoin and the broader crypto market. Bitcoin briefly rebounded above $73,000 after the recent market selloff, although overall trading activity remains subdued ahead of both the inflation report and the monthly crypto options expiry.
Market participants now view the upcoming PCE release as one of the most important macroeconomic events for financial markets this month, as it could heavily influence expectations for future Federal Reserve policy and risk asset performance.
