Cooler US inflation data sparks Bitcoin rally above $85,000 and gold bounce

On Wednesday, bitcoin climbed past $85,000 and gold rallied sharply right after the release of fresh US inflation figures. The Federal Reserve's favored inflation measure increased 3.4% year-over-year, significantly under the 3.7% that analysts had predicted.

Gold prices moved higher in a sustained upward trajectory, breaking a week of declines.

How Much US Inflation Cooled

The personal consumption expenditures (PCE) index tracks the prices Americans pay for goods and services. Among all inflation metrics, the Fed monitors this one most closely.

Headline PCE decelerated to 3.4%, down from 3.7% in July. Core PCE, which strips out volatile food and energy, rose 3.0%, below the 3.3% consensus.

Core PCE much cooler than expected, as previewed:

PCE 0.3% MoM, Exp. 0.3%
PCE 3.4% YoY, Exp. 3.7%

PCE Core 0.2% MoM, Exp. 0.3%,
PCE Core 3.0% YoY, Exp. 3.3% https://t.co/vZws3Ik41Q

— zerohedge (@zerohedge) September 30, 2026

Month-over-month, core prices advanced 0.2%, below the 0.3% expected. Headline PCE increased 0.3%, matching forecasts.

Bullish for Bitcoin and Gold?

This data release is relevant to interest rate expectations. The Federal Reserve, currently hiking rates, had this report among two it was monitoring ahead of its October 27-28 meeting.

On September 16, the Fed raised rates by 0.25 percentage points to a 3.75%-4.00% corridor, marking its first increase since 2023. Among 18 policymakers, 16 anticipated at least one additional hike by the end of the year.

Market participants had prepared for a stronger inflation figure. According to CME FedWatch data as of September 28, the probability of an October rate increase stood at 72.5%. After the data, those odds fell below 40%.

The US dollar had been strong heading into the release. The US Dollar Index, measuring the currency against a basket of major peers, was on track for its strongest month since June, supported by the Fed's hawkish stance.

A weaker inflation reading undermines the argument for another rate increase. As BeInCrypto noted earlier this month, reduced expectations for rate hikes typically boost Bitcoin by relieving pressure from Treasury yields. Gold, which yields no interest, also becomes less attractive when rates rise.

Some of the slowdown might be due to technical factors. Bank projections before the release had flagged the possibility, forecasting core PCE to come in near 0.27%.

The Bureau of Economic Analysis modified its methodology for pricing in three categories. This adjustment was anticipated to reduce August's annual reading by a few tenths of a percentage point.

Strong GDP Keeps a Fed Hike in Play

Simultaneously released growth figures painted a different picture. US gross domestic product, the broadest measure of economic output, expanded at a 2.2% annualized pace in Q2, exceeding the 1.5% consensus estimate.

US FINAL Q2 GDP +2.2% (CONSENSUS +1.5%)

US FINAL Q2 PCE PRICE INDEX +5.0%

US FINAL Q2 CORE PCE +3.3% (CONSENSUS +3.6%)

— *Walter Bloomberg (@DeItaone) September 30, 2026

Consumer spending also increased. Inflation-adjusted personal consumption expenditures rose 0.6% in August, the largest monthly advance since March 2025.

Friday's September employment report marks the final significant economic indicator before the Fed's next meeting. Officials will balance subdued inflation against strong spending and economic expansion.