STAGFLATION WARNING: THE FED IS IN A TOUGH SPOT
US economic data is sending a mixed signal that could make the Fedâs next decision extremely difficult.
Inflation is still proving stubborn.
đ PCE inflation: 3.7%
vs. 3.6% expected
đŻ Fed target: 2%
Meanwhile, economic growth is losing momentum.
đ Q2 GDP: 1.5%
vs. 2.1% in Q1
Put those numbers together and you get a combination investors hate:
Prices are still rising while economic activity is cooling.
That creates a major policy dilemma for the Federal Reserve.
âĄïž Keep rates high or raise them â inflation may cool, but economic growth could take another hit.
âĄïž Cut rates â growth could get support, but inflation may become even more persistent.
This is why stagflation risk is once again becoming a serious market narrative.
And traders are already adjusting their expectations.
Following the latest inflation data, the implied probability of a September Fed rate hike climbed to around 44%, compared with roughly 36% previously.
Thatâs a meaningful shift.
The problem for markets is that there may no longer be an easy policy choice for the Fed.
And if inflation remains elevated while growth continues weakening, the impact could spread across stocks, crypto, bonds and the US dollar.
đ„ The next few economic reports could matter more than the market expects.
The Fed is watching inflation.
Markets are watching the Fed.
And everyone is watching the economy.
#BTCâ #Ethereum #FedRateDecisions #FedMeeting
US economic data is sending a mixed signal that could make the Fedâs next decision extremely difficult.
Inflation is still proving stubborn.
đ PCE inflation: 3.7%
vs. 3.6% expected
đŻ Fed target: 2%
Meanwhile, economic growth is losing momentum.
đ Q2 GDP: 1.5%
vs. 2.1% in Q1
Put those numbers together and you get a combination investors hate:
Prices are still rising while economic activity is cooling.
That creates a major policy dilemma for the Federal Reserve.
âĄïž Keep rates high or raise them â inflation may cool, but economic growth could take another hit.
âĄïž Cut rates â growth could get support, but inflation may become even more persistent.
This is why stagflation risk is once again becoming a serious market narrative.
And traders are already adjusting their expectations.
Following the latest inflation data, the implied probability of a September Fed rate hike climbed to around 44%, compared with roughly 36% previously.
Thatâs a meaningful shift.
The problem for markets is that there may no longer be an easy policy choice for the Fed.
And if inflation remains elevated while growth continues weakening, the impact could spread across stocks, crypto, bonds and the US dollar.
đ„ The next few economic reports could matter more than the market expects.
The Fed is watching inflation.
Markets are watching the Fed.
And everyone is watching the economy.
#BTCâ #Ethereum #FedRateDecisions #FedMeeting
