Today could set the tone for financial markets heading into the final quarter of 2026. It could also land at an awkward moment for Donald Trump, with voters increasingly focused on prices just weeks before the US midterm elections.
- PCE inflation: The Federal Reserve’s preferred inflation gauge measures how prices are changing across what Americans actually spend money on. Economists expect headline inflation to remain at 3.7%, while core PCE is forecast at 3.3%, with a 0.3% monthly increase.
- Q2 GDP: The US will publish its third estimate of economic growth between April and June. The previous estimate showed 1.5% annualized growth, and markets expect little change.
- Why it matters: The Fed raised rates this month for the first time in three years. Today’s data could decide if they will raise rates again in October.
- The bigger test: Hot inflation could push bond yields higher and hit stocks and crypto again. A softer number could challenge one of Wall Street’s biggest trades of September.
Crypto Has Already Taken the First Hit
Bitcoin traded around $84,000 early Wednesday, while most major cryptocurrencies remained under pressure.
Some of today’s bad news is already priced in. Investors know inflation is expected to stay well above the Fed’s 2% target, while markets have already shifted sharply toward more rate hikes.
That means a 0.3% core PCE reading may produce limited surprise.
A 0.4% or 0.5% reading would be different. It could strengthen expectations for further Fed hikes, lift Treasury yields, and put another round of pressure on Bitcoin and higher-risk altcoins.
A 0.2% reading could trigger the reverse. Traders may start questioning whether the recent rise in rates has gone too far.
Stocks Face the Same Problem
Wall Street has handled the bond selloff surprisingly well.
The S&P 500 remains close to recent highs even as the 10-year Treasury yield has climbed above 5%. The yield has risen around 81 basis points since July and recently reached its highest level in 19 years.
Stocks slipped Tuesday, with the S&P 500, the Dow, and Nasdaq trading lower. Another hot inflation reading would test how long that resilience can last.
Trump Has a Different Problem
The same inflation report will land just over a month before the November midterms.
A Reuters/Ipsos poll last week put Trump’s approval rating at 32% — the lowest of his political career.
Reuters said rising prices have become a major political problem, with roughly half of voters naming the cost of living as the most important issue in the congressional elections.
Consumer confidence has also fallen to a 12½-year low, as households face expensive fuel, groceries and borrowing costs.
PCE will not decide an election.
But if inflation refuses to fall while interest rates keep rising, it gives voters another economic number that matches what many already feel at the checkout and the gas pump.
That makes today’s release a test far beyond Wall Street.
