The latest economic data shows that inflation in the U.S. has risen again, with the core PCE inflation rate reaching 2.8% in October. This number is not good news for the Federal Reserve and may impact their monetary policy, potentially affecting the cryptocurrency market as well.
This inflation data is a key indicator that central bank policymakers use to gauge inflation. The Kobeissi Letter tweeted that the Federal Reserve's nightmare has arrived, as the latest data shows that all three inflation indicators are rising.
Since July, the cost of living in the U.S. has been increasing, and inflation is now stabilizing above the Federal Reserve's target of 2%, which will also affect multiple aspects of the economy, including monetary policy, consumer behavior, corporate decisions, and financial market performance.
Core CPI has remained above 3% for 42 consecutive months, marking the longest consecutive increase since the early 1990s. This means we may be in a period of compound inflation.
Moreover, the tariffs proposed by Trump on China, Canada, and Mexico may also drive up consumer prices and inflation. In response, Goldman Sachs economists predict that if the tariff measures are implemented, core PCE prices could rise by 0.9%. This means that consumers may face increased costs for goods and services in their daily lives.
The view is that if inflation continues to rise, the Federal Reserve may stop cutting interest rates and even begin to raise them. This is usually not good news for risk assets, such as cryptocurrencies, because low-risk cash-related investments will become more attractive, leading to reduced liquidity in the venture capital market.
Nonetheless, the cryptocurrency market continued to rise this week, with a total market capitalization reaching $3.5 trillion again, mainly driven by Ethereum and altcoins. This indicates that the new government's support for cryptocurrencies and major institutional investments may be enough to offset the Federal Reserve's shift to a hawkish stance.
What do you think about the U.S. inflation data and its impact on the cryptocurrency market?
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