Headline inflation at 3.8% keeps Fed on hold; Bitcoin ETFs log sustained outflows
The Federal Reserve’s April Personal Consumption Expenditures report delivered a mixed signal that tilted toward tightness. Headline PCE rose 3.8% year-over-year, its hottest pace in two years and nearly double the Fed’s 2% target. Core PCE, the gauge stripping volatile food and energy prices, held at 3.3%, its highest reading since October 2023.
The monthly core PCE figure of 0.2% came in cooler than the 0.3% economists forecast, briefly supporting Bitcoin. The cryptocurrency climbed to $73,300 following the report’s release. But the elevated annual headline reading swiftly reversed that momentum. Bitcoin hovered near $73,000 through the weekend as traders repriced rate-cut odds.
The conflicting signals reflect a deeper problem for asset prices: inflation remains sticky at the headline level, removing any near-term case for the Federal Reserve to ease policy. The CME FedWatch tool now shows 98.9% odds the Fed will hold rates at its June 17 meeting, with traders pricing only 1% odds of a rate cut that day. The Fed’s current rate range sits at 3.50% to 3.75%.
Kevin Warsh, who became Federal Reserve Chair on May 22, built his reputation on inflation discipline and preference for a lean central-bank balance sheet. Both positions typically keep liquidity conditions tight, a headwind for non-income-producing assets like Bitcoin.
Ellen Zentner, Morgan Stanley analyst, noted that “rising prices are now taking a real bite out of consumption and that the shrinking savings cushion shows households dipping into reserves to keep spending.” Real disposable income fell 0.5% in April for a second consecutive month, and the household saving rate thinned to 2.6%.
Bitcoin ETFs have borne the brunt of the shift. On May 28 alone, the products logged $229 million in outflows, with BlackRock’s IBIT Bitcoin ETF accounting for $178 million of that total. Over a two-week period, $2.7 billion in capital exited Bitcoin and Ethereum products. Bitcoin has declined 30% over the past year.
Morgan Stanley launched its MSBT Bitcoin fund in April 2026, entering a market increasingly sensitive to Fed policy shifts. Renewed tension around the Strait of Hormuz has kept crude oil prices elevated, creating risk to disinflation expectations that might otherwise support easier monetary policy later in the year.
The next Personal Income and Outlays release, which will cover May data, is scheduled for June 25.
