Major Wall Street banks have raised their forecasts for August core PCE inflation following the latest Consumer Price Index data, signaling renewed concerns about persistent inflation pressures. The revisions have intensified expectations for a potential Federal Reserve rate hike in September, weighing on the crypto market and other risk-sensitive assets.
Barclays now expects monthly core PCE inflation at 0.25%, compared to its prior forecast of 0.22%. Goldman Sachs raised its projection to roughly 0.26% from 0.24%, while Nomura increased its estimate to about 0.278% from 0.245%. Bank of America expects a 0.30% monthly increase, up from 0.26%, and TD Securities forecasts 0.32%, elevated from its previous 0.24% estimate.
The core PCE index is a key inflation metric for the Federal Reserve, as it excludes volatile food and energy prices to measure underlying inflation trends. Stronger readings typically prompt policymakers to maintain a cautious stance on easing financial conditions, which can pressure risk assets including cryptocurrencies.
According to the CME FedWatch Tool, the probability of a 25 basis point rate hike in September stands at 87.3%, with prediction markets showing 80% odds of such a move. The European Central Bank recently approved its own 25 basis point rate hike, further contributing to market uncertainty.
Crypto traders are closely monitoring these developments, as higher interest rates generally create challenging conditions for speculative and risk-prone assets. The combination of elevated inflation forecasts and mounting rate hike expectations has kept market participants cautious as the Fed approaches its next policy decision.
