Main Topic: U.S. inflation and the Federal Reserve's efforts to control it.
Key Points:
1. U.S. inflation has declined for 12 straight months, but consumer prices increased 3% year-on-year in June.
2. The Federal Reserve aims to reduce inflation to about 2% and plans to raise its key federal funds rate to over 5%.
3. The Fed is concerned about high inflation due to a strong labor market, rising wages, and increased consumer spending, and aims to slow the job market to control inflation.
The Federal Reserve faces new questions as the U.S. economy continues to perform well despite high interest rates, prompting economists to believe a "soft landing" is possible, with optimism rising for an acceleration of growth and a more sustainable post-pandemic economy.
The cryptocurrency market has experienced a notable downturn, with the total market capitalization falling by 10% and triggering significant liquidations on futures contracts, attributed to factors such as rising interest rates, inflation, delays in approving a Bitcoin exchange-traded fund (ETF), financial difficulties within the Digital Currency Group (DCG), regulatory tightening, and a strengthening US dollar.
The US Federal Reserve must consider the possibility of the economy reaccelerating rather than slowing, which could have implications for its inflation fight, according to Richmond Fed President Thomas Barkin. He noted that retail sales were stronger than expected and consumer confidence is rising, potentially leading to higher inflation and a need for further tightening of monetary policy.
Emerging markets are facing challenges due to the Federal Reserve's efforts to combat inflation and China's economic slowdown.
Concerns of a stock market crash are growing as economists await the release of the second-quarter GDP report, which could provide insight into the impact of the Federal Reserve's rate-hike campaign and future monetary policy changes. The report may have a significant effect on equity markets, which have been sensitive to economic data releases this year.
The Federal Reserve is losing its power to influence the US economy, according to Wall Street economist Richard Koo, potentially requiring higher interest rates to drive inflation down and leading to a selloff in stocks and bonds.
The US Federal Reserve's actions will determine the start of the next Bitcoin bull market, depending on their monetary policy decisions and willingness to hold interest rates higher for longer.
The U.S. is currently experiencing a prolonged high inflation cycle that is causing significant damage to the purchasing power of the currency, and the recent lower inflation rate is misleading as it ignores the accumulated harm; in order to combat this cycle, the Federal Reserve needs to raise interest rates higher than the inflation rate and reverse its bond purchases.
The risk of inflation becoming entrenched is one of the biggest challenges facing the Federal Reserve, according to LPL Financial's Jeffrey Roach.
A joint policy paper by the IMF and FSB advises against blanket bans on cryptocurrency and instead recommends targeted restrictions and sound monetary policy to mitigate risks, highlighting that global stablecoins pose a greater risk to financial stability than other cryptocurrencies.
Bitcoin, Ethereum, and other cryptocurrencies have been experiencing a steady decline in prices due to concerns from the Federal Reserve, leading to warnings of a potential price crash, although some analysts remain hopeful for improvement.
The Federal Reserve has expressed concerns about disruptions in the US Treasury market due to hedge fund trading strategies that could exacerbate market crashes.
Bitcoin and other cryptocurrencies experienced fluctuations following the release of U.S. inflation data, signaling a potential impact of higher interest rates on digital currencies.
Cryptocurrency prices remained stable as inflation in the U.S. surpassed economists' expectations, with Bitcoin trading at around $26,100 and Ethereum experiencing a slight dip of 0.5%. The Federal Reserve will consider this report, among other factors, for its upcoming interest rate announcement on September 20. While inflation has decreased since June, it still exceeds the Fed's target of 2% annually. Core inflation, excluding volatile food and energy costs, decreased to 4.3% in August compared to July's 4.7%.
Cryptocurrency prices are less influenced by macroeconomic factors compared to traditional financial assets, with key drivers being market confidence, adoption, technology, and liquidity conditions, while traditional assets are more affected by macroeconomic drivers such as interest rates and inflation, as well as government regulations and transparency requirements.
The Federal Reserve faces a critical decision at the end of the year that could determine whether the US economy suffers or inflation exceeds target levels, according to economist Mohamed El-Erian. He suggests the central bank must choose between tolerating inflation at 3% or higher, or risking a downturn in the economy.
The positive momentum surrounding Bitcoin's price is fueled by expectations that the Federal Reserve will not hike rates again this year, while market participants remain optimistic despite the strength of the United States Dollar Index.
Bitcoin and other cryptocurrencies experienced a rise prior to the Federal Reserve's decision on interest rates, signaling possible volatility in the market.
The Federal Reserve's uncertainty about 2024 is causing concern for the markets.
Crypto analyst Will Clemente suggests that the US economy's need to issue more dollars to service its debt will inevitably lead to significant currency debasement, making Bitcoin the most promising asset for investors looking to protect their wealth. With the growing digital trend and a wave of Bitcoin adoption, Clemente believes that alternative monetary systems will become increasingly favorable.
The dollar strengthens and stocks decline as the Federal Reserve delivers a "hawkish pause" during the Fed meeting, with updates on the interest-rate decision, dot plot, and Jerome Powell press conference.
Bitcoin and other cryptocurrencies experienced a decline after the Federal Reserve decided not to raise interest rates, suggesting that significant gains may not be anticipated in the near future.
The stock market faces a major issue as the dollar reaches a crucial level and could potentially break out.
The Federal Reserve's decision to maintain interest rates and raise its long-term forecast for the Federal Funds Rate surprised many market participants, causing a slight pullback in the stock and cryptocurrency markets while highlighting the need for investors to focus on the actual health and viability of companies and the utility of the crypto ecosystem. Additionally, the article speculates on the impact of the U.S. Securities and Exchange Commission's ruling on Bitcoin spot ETF applications and the potential for cryptocurrency to become a mainstream alternative investment.
The Federal Reserve's measure of inflation is disconnected from market conditions, increasing the likelihood of a recession, according to Duke University finance professor Campbell Harvey. If the central bank continues to raise interest rates based on this flawed inflation gauge, the severity of the economic downturn could worsen.
The Federal Reserve's decision to hold interest rates at their highest in over 20 years is posing a "nightmare" scenario for bitcoin and crypto companies, potentially leading to price chaos and further decline in the bitcoin price.
The Federal Reserve's decision to hold interest rates and the possibility of rates remaining higher for longer may have triggered a sell-off in the US equities and cryptocurrency markets, with risk assets typically underperforming in a high-interest-rate environment.
The Federal Reserve's revision to its monetary policy, reducing future rate cuts and indicating a commitment to tackling inflation, caused shockwaves in the financial markets, leading to a decline in gold prices.
The Federal Reserve's concern over inflation and its potential impact on the economy is being compared to the inflationary period of the 1970s, but there are significant differences in the economic landscape today, including a higher debt burden and a shift from manufacturing to services as the primary driver of economic activity. As a result, a repeat of the high inflation and interest rates of the 1970s is unlikely, and the bigger worry should be the potential for a financial crisis in a debt-dependent financial system.
Investors are focusing on the release of economic reports on GDP and inflation as they evaluate the Federal Reserve's stance on interest rates and its efforts to cool down inflation. Metal prices have slipped due to concerns over global demand and the economy, and the risk of a government shutdown is also adding to the bearish sentiment. Earnings reports from various companies and core PCE inflation data are expected in the week ahead.
The Federal Reserve's recent hawkish stance and the sharp tightening of financial conditions have triggered jolts in bonds and stocks, raising questions about investor positioning going into the final quarter of 2023.
Major cryptocurrencies like Bitcoin, Ethereum, and XRP are anticipating a potential surge in price due to a "worst-case" scenario from the Federal Reserve, according to JPMorgan CEO Jamie Dimon.
The U.S. economy is experiencing turbulence, as inflation rates rise and U.S. Treasuries lose value, leading to concerns about whether Bitcoin and risk-on assets will be negatively impacted by higher interest rates and a cooling monetary policy.
The Federal Reserve and oil prices are in focus this week as the economic calendar remains busy, while the crypto market has experienced a surge in momentum over the weekend, with Bitcoin reaching its highest level since August 17.
Overall inflation has moderated recently in the United States and euro area, but core inflation remains sticky, creating a challenge for central banks trying to meet their inflation targets. Financial conditions have eased, complicating the fight against inflation by preventing a slowdown in aggregate demand. The combination of loose financial conditions and a monetary policy tightening cycle may have dulled the effectiveness of monetary policy. There are risks of a repricing of risk assets and potential vulnerabilities in the financial sector, emphasizing the need for central banks to remain determined in their fight against inflation.
The Federal Reserve will continue to raise interest rates as inflation resurfaces, according to Wall Street investor Caitlin Long, with big corporations benefiting while other sectors of the US economy are already in recession.
Bitcoin's sharp rally on October 1 may have been influenced by a temporary agreement reached by US legislators to avert a government shutdown, combined with the historically strong performance of Bitcoin in October, while the US stock markets are also in a favorable position this month. However, the rising US dollar index could pose a challenge for the bulls in the cryptocurrency markets.
The Federal Reserve's shift towards higher interest rates is causing significant turmoil in financial markets, with major averages falling and Treasury yields reaching their highest levels in 16 years, resulting in increased costs of capital for companies and potential challenges for banks and consumers.
Former CEO of BitMEX, Arthur Hayes, predicts that the United States government's ballooning treasury yields could lead to a new bull market for Bitcoin and cryptocurrencies, as rising interest rates may force the government to resort to mass liquidity injections.
The article warns that a financial crisis is likely to follow the Federal Reserve's interest rate campaign, citing the examples of the Long Term Capital Management (LTCM) crisis and the Financial Crisis of 1966 as evidence of the dangers of excessive leverage and the importance of the Fed's reaction function in mitigating such crises.
The recent stock market declines may indicate that the Federal Reserve's actions could result in future pain for the economy.
Bitcoin could face difficulties in the long term due to tightening liquidity in the current macroeconomic environment, according to crypto analyst Nicholas Merten. Merten believes that Bitcoin's price is heavily influenced by monetary policy and warns that if sentiment turns bearish, investors may start cashing out.
Stock markets are wavering as investors anticipate another rate hike by the US Federal Reserve, fearing its impact on the global economy, however, recent inflation data suggests that inflation is declining and consumer spending is rising.
