Bitcoin’s Rate-Cut Hopes Fade as Services Inflation Remains Sticky

US services sector growth cooled in October, but a key inflation gauge climbed to its highest level in more than a year, clouding the outlook for Federal Reserve rate cuts that could support Bitcoin.

The Institute for Supply Management’s October services report, released November 4, showed the headline PMI at 54.5, down slightly from 54.9 in September. The reading stayed above 50, signaling continued expansion in services activity.

The monthly prices index eased to 73 from 74, yet its 12-month average rose to 69.2—the highest since April 2023. This suggests persistent cost pressures even as the latest monthly reading retreated.

ISM’s diffusion indexes capture the direction and breadth of survey responses. A prices reading of 73 reflects those responses, while an inflation rate measures the actual size of price changes in percentage terms. The rolling average tracks that pressure over a longer period.

Business activity and new orders eased to 53.8 and 55.9, respectively, while the employment index rose to 51.4, indicating hiring strengthened even as demand softened.

ISM cited tariffs and fuel costs as the most frequently mentioned supply-chain concerns. Some respondents said they had not yet passed higher costs on to customers, leaving the ultimate effect on consumer inflation uncertain.

The Federal Reserve held its target range at 3.75% to 4% on October 28, ahead of the services release. In its statement, the central bank described inflation as elevated and said more information would be needed to determine the appropriate policy stance.

Weaker activity could support easier rate expectations and greater risk appetite among investors. However, persistent inflation complicates that path to relief. Whether financial conditions actually ease will depend on how markets price the outlook, not just on a single survey.

The next major U.S. data point is the October employment report, scheduled for November 6. As of November 5, those results remained pending and could shift the balance between growth and inflation concerns for policymakers.

The test ahead is whether incoming data feed easier rate expectations and lower yields, strengthening the case for relief. Unleveraged Bitcoin buying could provide separate support through underlying demand.

Source link