macrocredibility

After a prolonged shutdown, the BLS released delayed labour and inflation data based on questionable assumptions that flattered a rate-cut narrative. Markets largely shrugged: SOFR was still priced for only limited easing, and long yields barely budged, showing that credibility now carries as much weight as the prints.
The incentives may be as fiscal as political, given how progressive income-tax receipts track equity markets. Meanwhile, the ECB’s pathless pause and the BoE’s hawkish cut temper expectations of a smooth easing cycle.
For crypto, diminished faith in data and reaction functions lifts risk premia and keeps implied forward yields muted until data credibility is restored.
After nearly six weeks of operational paralysis, the U.S. Bureau of Labor Statistics (BLS) has resumed publishing key economic indicators. The long-delayed releases of November nonfarm payrolls, unemployment, and CPI—data that should have been available in early December—were finally delivered to markets this week.
The reaction was not relief. It was disbelief.
With October data missing entirely and large gaps in early November, the figures arrived less as statistical updates and more as narrative placeholders. Unemployment “rose,” CPI “fell,” and the composite message appeared neatly aligned with a single policy implication: rate cuts are justified.
Markets were unconvinced.
When the Numbers Don’t Convince
The credibility gap was articulated bluntly by Nick Timiraos, often described as the Federal Reserve’s semi-official interpreter, who called the situation “totally inexcusable.” According to his analysis, the BLS effectively assumed October rent and owners’ equivalent rent (OER) inflation were zero—a technical choice that mechanically lowered the two-month averages.
There is no realistic macroeconomic environment in which that assumption makes sense.
Yet even with CPI printing “below expectations,” markets refused to play along. SOFR futures still price only two 25bp cuts next year, and moves in 10-year Treasuries and long bonds were marginal at best. In other words, traders acknowledged the numbers—but discounted the story behind them.
When data quality itself becomes uncertain, positive surprises lose power.
Why Publish Flawed Data at All?
Two explanations dominate.
The first is political pressure. With a presidential election backdrop, presenting data that appear to validate easing financial conditions is hardly neutral.
The second is more structural—and arguably more compelling.
Because the U.S. tax system is progressive, government revenues are highly sensitive to top-end income growth, which in turn is closely tied to equity market performance. Capital gains, bonuses, stock-based compensation, and incentive pay all expand when markets rally.
In that context, sustaining a constructive equity narrative is not just a market concern—it is a fiscal one.
But there is a limit to how far this strategy can go. Persistently strong growth and sticky inflation make it difficult for the Federal Reserve to justify aggressive easing. The September–December cuts were framed as “defensive,” aimed at protecting the labor market. Whether that framing can persist is increasingly questionable.
Supportive data without credibility does not anchor expectations—it erodes them.
Europe Pauses, Britain Cuts—Both Signal Restraint
Across the Atlantic, central banks are responding to similar constraints with different tools, but a shared objective: breaking market path dependence.
The ECB: A Pause Without Promises
The European Central Bank held rates steady, but President Lagarde offered no forward guidance. Inflation projections remain cautiously aligned with the 2% target, yet services inflation continues to ease slowly, justifying restraint.
The message was clear: better to offer less certainty than to declare victory too early.
The BoE: A Hawkish Cut
The Bank of England cut rates by 25 bps, but wrapped the decision in cautious language and a split vote. Inflation is falling, but services inflation and wage growth remain elevated. The result was a textbook hawkish cut—easier policy, tighter expectations.
In both cases, central banks are pushing back against the market’s desire for a smooth, predictable easing cycle.
Crypto’s View: Uncertainty Isn’t Bullish
Crypto markets are responding accordingly.
Implied forward yields for BTC (~5.16%) and ETH (~3.75%) remain near historical relative lows. Long-term bearish expectations have not meaningfully improved.
This reflects a deeper issue: crypto benefits from predictable liquidity expansion, not from ambiguous easing narratives built on questionable data.
When macro credibility weakens, crypto is not treated as a clean rate-cut trade. Instead, it is priced as a high-volatility exposure requiring higher risk premia. Capital gravitates toward simpler macro hedges—gold, cash, duration—rather than assets that depend on confidence in policy follow-through.
If “definition uncertainty” becomes embedded—where traders must bet not on the number, but on the credibility of the number and the stability of the reaction function—crypto suffers disproportionately.
Low implied yields, in this environment, are not a green light. They are a warning: the market is unwilling to pay to believe.
Bottom Line
You can massage a monthly print.
You cannot easily restore trust once it is lost.
Until data credibility improves—and until policy signals regain consistency—markets will continue to discount narratives, demand higher risk premia, and treat optimism with caution.
For crypto, that means patience, not euphoria.
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