As a seasoned crypto investor with over two decades of market experience under my belt, I can’t help but feel a sense of déjà vu when reading about the latest inflation numbers and the Fed’s potential response. The 1970s and early ’80s were a rollercoaster ride of high inflation, interest rate hikes, and economic turmoil – a period that left deep scars on my portfolio.
The economic data unveiled in the U.S. on Wednesday has sparked some concern, with the Core PCE inflation climbing up to 2.8% in October.
The Personal Consumption Expenditures report shows the typical monthly spending by consumers, serving as a key indicator for central bank decision-makers when measuring inflation rates.
According to the Kobeissi Letter, their fears about rising inflation have been realized as this week’s data indicates a resurgence in all three measures of inflation.
Compounding Inflation
Since July, these reports have been suggesting an upward trend in the cost of living within the U.S., and more recently, all three measures of inflation are on the rise too, this has become apparent.
After a period since February 2022, all three key inflation indicators – Core CPI, PCE, and PPI – are currently increasing concurrently.
The statement also highlights that inflation remains persistently higher than the Federal Reserve’s 2% goal. In other words, the obvious issue (the “elephant in the room”) is the sustained elevation of inflation rates.
The Fed’s worst nightmare is officially here:
Today’s data confirms ALL 3 inflation metrics are back on the rise.
Since February 2022, it’s the first occasion where all three key indicators – Core Consumer Price Index (CPI), Personal Consumption Expenditures (PCE), and Producer Price Index (PPI) inflation rates – are on an upward trend simultaneously.
Did the Fed spark a new wave of inflation?
(a thread)
— The Kobeissi Letter (@KobeissiLetter) November 27, 2024
As a researcher, I’d like to highlight an interesting trend: The Core Consumer Price Index (CPI) has surpassed 3% for an uninterrupted 42 months – the longest stretch since the early ’90s. This extended period suggests that we are experiencing persistent inflation, in essence, compounding inflation over time.
The potential tariffs suggested by the newly elected President Trump on China, Canada, and Mexico might lead to higher costs for consumers and potentially boost inflation rates again.
This week, Goldman Sachs’ economists forecasted that tariffs could influence people’s spending on consumer goods.
Based on our general guideline, a 1% rise in the effective tax rate could cause a 0.1% increase in core Personal Consumption Expenditures (PCE). Therefore, we predict that the proposed tariff hikes might lead to a 0.9% increase in core PCE prices if they are implemented.
Impact on Crypto
If inflation continues to rise, the Federal Reserve might shift its approach to become more aggressive (hawkish) in either stopping decreases in interest rates or potentially raising them again.
Following a 50 basis point reduction in interest rates for the first time in 2008, the Federal Reserve (Fed) is currently expressing concerns, as articulated by chairman Jerome Powell, who has stated that the central bank is not inclined towards acting swiftly to lower rates.
Elevated interest rates tend to be a downside for speculative assets like cryptocurrencies because safer cash alternatives become more enticing. Furthermore, increased interest rates lead to reduced liquidity and available funds for investment due to decreased borrowing opportunities.
Despite some initial doubts, the value of cryptocurrencies rose throughout the week, pushing the total market cap back up to $3.5 trillion. This surge was mainly fueled by Ethereum and various other alternative coins.
A favorable shift in government policy towards cryptocurrencies, along with significant adoption by institutions, might have enough strength to counterbalance any tightening monetary policy from the U.S. Federal Reserve.
Read More
- FARTCOIN PREDICTION. FARTCOIN cryptocurrency
- SUI PREDICTION. SUI cryptocurrency
- Excitement Brews in the Last Epoch Community: What Players Are Looking Forward To
- The Renegades Who Made A Woman Under the Influence
- RIF PREDICTION. RIF cryptocurrency
- Smite 2: Should Crowd Control for Damage Dealers Be Reduced?
- Is This Promotional Stand from Suicide Squad Worth Keeping? Reddit Weighs In!
- Epic Showdown: Persona vs Capcom – Fan Art Brings the Characters to Life
- Persona Music Showdown: Mass Destruction vs. Take Over – The Great Debate!
- “Irritating” Pokemon TCG Pocket mechanic is turning players off the game
2024-11-28 14:17