Inflation is "below expectations"—why might the Fed still raise rates?
The U.S. August PCE reported on September 30 was 3.4%, a bit lower than the expected 3.7%—but the month-over-month figure of 0.3% is actually accelerating. Core PCE at 3.0% hasn’t budged, and the word "cooling" still isn’t in the cards. The real twist is on the other side: the Q2 GDP final estimate was revised sharply up from 1.5% to 2.2%, and September’s ADP added another 90,000 jobs— the economy is unbelievably strong.
So the market only dares to bet on "no rate hike in October" (the probability has been slashed from 70% to 35%). No one dares to bet that "the tightening cycle is over"—and the 10-year Treasury yield even surged to a 2024 high of 5.3%.
Translated into crypto-speak: the boot of liquidity tightening hasn’t quite landed—risk assets caught a breath. But core inflation is still pinned above 3%, and the knife of rate hikes is still hanging.
Which side are you on: "data-weakened camp—there’s an end to the hiking cycle," or "the economy is too strong camp—there’s still one more hike this year"?
The U.S. August PCE reported on September 30 was 3.4%, a bit lower than the expected 3.7%—but the month-over-month figure of 0.3% is actually accelerating. Core PCE at 3.0% hasn’t budged, and the word "cooling" still isn’t in the cards. The real twist is on the other side: the Q2 GDP final estimate was revised sharply up from 1.5% to 2.2%, and September’s ADP added another 90,000 jobs— the economy is unbelievably strong.
So the market only dares to bet on "no rate hike in October" (the probability has been slashed from 70% to 35%). No one dares to bet that "the tightening cycle is over"—and the 10-year Treasury yield even surged to a 2024 high of 5.3%.
Translated into crypto-speak: the boot of liquidity tightening hasn’t quite landed—risk assets caught a breath. But core inflation is still pinned above 3%, and the knife of rate hikes is still hanging.
Which side are you on: "data-weakened camp—there’s an end to the hiking cycle," or "the economy is too strong camp—there’s still one more hike this year"?