Truflation urges Fed to cut rates after near-perfect PCE forecast — what it means for crypto Truflation is pressing the Federal Reserve to begin trimming interest rates after its July PCE forecast landed almost exactly on the Bureau of Economic Analysis’ (BEA) official reading. Truflation’s July estimate for headline PCE was 0.19% month-over-month — a hair shy of the BEA’s reported 0.2% — and it matched the other three headline and core readings at published precision. The BEA’s data showed headline PCE +0.2% for July (3.7% year-over-year) and core PCE +0.2% (3.3% year-over-year). The Fed uses PCE as its preferred inflation gauge and targets 2% over the long run. Why Truflation wants a rate cut Truflation’s Head of Data, Oliver Rust, told crypto.news that weakening household demand, mixed employment signals and falling gasoline prices have created a credible case for lower borrowing costs. “Truflation is of the opinion that we have reached a turning point that needs the Fed to cut rates. We are seeing a softening in demand, i.e., spending,” he said. Data backing the view - Real personal consumption expenditures were essentially flat in July, down from a 0.4% rise in June. - Current-dollar consumer spending rose by $36.3 billion as services increased by $86.2 billion while goods spending fell $49.9 billion. - Personal income rose 0.4% and disposable personal income gained 0.5%. - Households saved $712 billion in July, leaving the personal savings rate at 3%. Truflation warns that declining excess savings and greater reliance on credit could weigh on demand in the second half of 2026. - Retail sales dropped 0.6% in July, ending an eight-month streak without a monthly decline; Truflation cites fading tax-refund boosts, higher energy bills and more cautious discretionary spending. Labor market and participation Truflation characterizes the labor market as a “low-hire, low-fire environment.” Its report estimates unemployment at 4.1% and labor-force participation at 61.4%, noting nearly 1.4 million people left the workforce during 2026 — a dynamic that factors into the firm’s call for easier policy. How Truflation builds its PCE read Truflation’s TruPCE maps its proprietary price data to the BEA’s PCE categories and applies the agency’s weights so its daily index tracks the government measure while delivering earlier signals — roughly 30 days ahead on average. The company ingests more than 15 million product prices from 30+ partners and publishes daily readings; the BEA reports monthly and can revise prior estimates. July was only Truflation’s fourth published PCE forecast; it matched June, and missed April and May by 0.1 percentage point each. Category movers in July - Gasoline and other energy goods fell 3.36% month-over-month but remained 23.6% higher year-over-year. - Food services and accommodation rose 1.21% MoM and 3.61% YoY, boosted by summer travel and higher operating costs. - Transportation services climbed 1.13% MoM and 12.25% YoY, driven by airfares and public transit. - Groceries increased 1.09% MoM, with beef, coffee and traded food commodities adding upward pressure. - Clothing and footwear fell 0.7% MoM but were up 4.24% YoY. - Utility prices surged 0.98% MoM and 7.64% YoY — the highest rates since mid-2024 — which Truflation partly links to rising electricity use and infrastructure needs tied to AI. Risks that could keep inflation sticky Wage growth — Truflation estimates annual pay increases between 4% and 4.5% since mid-2025 — remains a key upside risk because it can sustain inflation in labor-intensive services. Tariff shifts, oil-price moves and strong electricity demand could also prevent a steady slide in inflation. Where Truflation differs from Fed thinking Truflation’s post-release call for cuts contrasts with comments from some Fed officials. Kansas City Fed President Jeffrey Schmid recently said the 3.5%–3.75% policy range doesn’t look restrictive enough to bring inflation back to 2%, and Chicago Fed President Austan Goolsbee described persistent inflation as concerning even if rates could eventually come down with the right data. Truflation’s Aug. 21 report had been more cautious — forecasting the Fed would hold rates in September and avoid hikes for the rest of 2026 rather than predicting an immediate cut. Market reaction and crypto angle Markets barely budged after the PCE print. Bitcoin showed little initial reaction and was trading near $78,350 about 36 minutes post-release (pre-release range roughly $78,500–$79,000). The 10-year Treasury yield ticked up about one basis point to 4.65%. For crypto traders, the next major macro focal point is Jackson Hole: former Fed Governor Kevin Warsh is scheduled to speak Aug. 28, and Truflation flagged the July PCE and that speech as the main U.S. macro events shaping crypto risk sentiment this week. Bottom line Truflation’s near-perfect forecast and its daily TruPCE product give traders an earlier read on the Fed’s preferred inflation measure. While Truflation argues data are tilting toward a rate cut — driven by softer spending and falling gas prices — persistent wage growth, tariffs and utility costs keep upside risks alive. For crypto markets, that mix means volatility remains possible: a convincing disinflation trend could ease rates and boost risk assets, while sticky inflation could push yields and put pressure on crypto risk trades. Read more AI-generated news on: undefined/news