Inflation stickiness exceeds expectations, and the Fed's rate cut expectations are delayed again. Can the crypto market turn the tide against the headwinds?

U.S. November PCE Price Index Year-over-Year Release at 2.8%, Higher than Market Expectations of 2.7%. Although only 0.1 percentage point above expectations, behind this seemingly small difference lies a signal that inflation remains stubbornly sticky. As this data is released, U.S. stocks, gold, the dollar, and other assets immediately react, and the crypto market faces a new adjustment in its pricing logic.

The Inflation Story Behind the PCE Surprise

The PCE Price Index is the Federal Reserve’s most core inflation indicator, directly anchoring the long-term target of 2%. The November figure of 2.8% means inflation is still 0.8 percentage points above the target. This is not an isolated data point—it reflects entrenched inflationary pressures within the U.S. economy.

Looking at the data context, the U.S. economy shows strong growth momentum. According to the latest reports, the three major U.S. stock indices all rose, with Nasdaq futures up 0.87%, Dow up 0.31%, and S&P 500 up 0.57%. What is the logic behind this rally? The market is weighing two conflicting forces: on one hand, strong economic data (Q3 GDP annualized quarterly rate, personal consumption expenditures, etc.) supports risk assets; on the other hand, persistent inflation suggests the Fed may delay rate cuts further.

The Market’s Chain Reaction Has Begun

After the PCE data was released, the reactions across various assets clearly demonstrated the market’s re-pricing process.

According to data, spot gold surged 0.9% to $4,820 per ounce, and spot silver rose 2% to $93 per ounce. This may seem counterintuitive—usually, higher-than-expected inflation data would strengthen the dollar and suppress gold. But the reality is, the market is digesting a more complex logic: the Fed may need to keep interest rates high for a longer period, which supports the dollar in the short term but also means real interest rates could stay elevated. High real interest rates are generally negative for gold. However, the rise in precious metals indicates the market is also weighing another factor—the sustainability of economic growth under high interest rates. If growth slows, gold’s appeal as a safe haven increases.

The dollar index dipped slightly, which is equally significant. While inflation data above expectations usually benefits the dollar, the current market seems to be pricing in a delay in the Fed’s rate cut cycle rather than a rate hike. This subtle pricing difference reflects cautiousness about the economic outlook.

Key Tests Facing the Crypto Market

For the cryptocurrency market, such economic data are direct pricing variables. According to analysis, the core PCE Price Index is a key anchor for Fed monetary policy, directly influencing expectations of rate cuts.

When inflation data exceeds expectations, the market’s reaction chain is as follows:

Persistent inflation → Delay in Fed rate cuts → Prolonged high interest rate environment → Strengthening of the dollar → Pressure on risk assets (including cryptocurrencies)

However, the current market complexity is that U.S. stock futures are rising pre-market. This indicates the market is weighing another factor: although rate cuts are delayed, the economic fundamentals remain strong. In this context, the movements of BTC and ETH will depend on answers to the following questions:

• How long will the Fed maintain high interest rates?
• Can economic growth continue under high-rate pressure?
• How will market expectations for the rate cut cycle adjust?

Based on technical data provided, BTC is currently priced at $89,550, with support at $87,787.2 and resistance at $91,415.1. The battle within this price range will directly reflect the market’s pricing of the above questions.

Signals to Watch Closely Moving Forward

The U.S. November PCE is just one data point. More importantly, the market is watching the Fed’s response to this data. According to analysis, the market is also paying attention to other key economic indicators such as the Q3 U.S. GDP final value and initial jobless claims. The combination of these data will determine the clarity of the Fed’s policy path.

My personal view is that the current market is at a critical pricing juncture. The inflation data exceeding expectations has disrupted the optimistic outlook for rate cuts, but the strong economic fundamentals support risk assets. In this contradictory state, the crypto market may face higher volatility. Traders should manage risks carefully and closely monitor subsequent statements from Fed officials.

Summary

The U.S. November PCE Price Index exceeded expectations by 0.1 percentage points. Although the magnitude is small, the signal is significant. It indicates that inflation remains sticky, and the Fed’s rate cut expectations are pushed back again. This has triggered a chain reaction in assets like stocks, gold, and the dollar. For the crypto market, this means the high interest rate environment could persist longer—both a pressure and an opportunity—depending on how the market balances economic growth and monetary policy. Future focus should be on Fed officials’ policy statements and upcoming economic data, which will determine the short-term direction of the crypto market.