The #PCE Report: And there it is. I have been warning you all about it for the better part of 6 weeks, but we are now seeing the effects of the strong economy and uptick in demand in January. The PCE report came in today, with regular PCE coming in at 5.4% (Previously 5.3%), and the Core-PCE (PCE - Food & Energy) coming in at 4.7% (Previously 4.6%), not to mention that both were also about 0.3% above expectation, and the PCE rose 0.6% on the month-over-month report (The biggest increase since June 2022).

Now, this really puts us in a tough spot. Because 1 of two things will happen. Either the FED will hike rates by more than currently expected which would send markets down, or the #FED will stay on its current path in hopes that the lag of rate hikes kicks in and does the job (Rate hikes take about 6 months to assume their full effect). The only thing is that they take the risk of losing further control over inflation, which would then force them to raise rates even higher.

So the FED has to make a decision since we can't have inflation going up again. The longer this process takes, the higher rates go. The higher rates go, the higher the possibility of a #recession which would kick markets down (History suggests this will eventually happen as it usually does). Currently, markets are pricing the peak rates at 5.45% (This was 5.05% just a month ago), so it's slowly ticking up.

FED Members: We also had FED members speak today, and after the PCE report I was very intrigued to see what they had to say. This is obviously very important since they are the ones tasked with getting inflation down, so hearing what they have to say gives insight into what they might do next:

- Inflation Risk Has Ticked To The Upside.

- Disinflation Is Usually Met With A Recession.

- Inflation Is Fueled By Causes Not Seen Historically.

This to me is the FED once again pulling the same tricks, saying something in the least worrying way they can. Obviously, I understand this, the FED knows the effects they can have on markets, and they don't want to cause pre-emptive chaos/worry, but it doesn't take much to understand what they're eluding to. What I take from this is that the FED realizes that inflation has gotten a little out of hand again and that they know that uncertain scenario (Russia & Ukraine, the Covid pandemic, supply chain issues) has put them in a situation where avoiding a recession becomes increasingly difficult.

As I said, the longer inflation stays elevated, the higher rates will go and the higher the chance of a recession in the US. Inflation must be controlled, that's all. It must be done with as few hikes as possible, and quickly as possible. Otherwise, be ready for one more leg down in markets.-JIRO. #Binance #crypto2023

24.02 was an important day in macroeconomic terms. 16.30 US PCE data was released. Due to the recent slowdown in the rate of decline in inflation and the low unemployment rate, the markets had been focused on the PCE data since the beginning of the week. PCE, the personal consumption expenditure index, is one of the favorite indicators of the FED (Federal Reserve Bank of America).

Core PCE prices in the US, which exclude food and energy, jumped by 0.6% month-over-month in January of 2023, the most since August, following an upwardly revised 0.4% increase in the previous month and above market estimates of 0.4%. The annual rate, the Federal Reserve’s preferred gauge to measure inflation, rose by 4.7% and surpassed market expectations of 4.3%, backing signals from Fed policymakers that interest rates must be higher for longer to tame unsustainable price growth. Meanwhile, the headline figure rose by 0.6% from the previous month, the most since June and the annual rate accelerated to 5.4% from 5.3%.

Then new home sales were announced. We saw that new sales came in above expectations. All these data are actually not what the FED wants. There is only 1 month left until the interest rate hike meeting in March. Markets started to price the possibility of 3 interest rate hikes.



After all these developments, we have seen decrease of risk appetite in both traditional financial markets and cryptocurrency markets. Currently, Bitcoin is trading at USD 23,000.



#BTC #Binance #FED #PCE

According to a report by the Commerce Department on Friday, an inflation gauge that the Federal Reserve closely follows rose slightly less than anticipated in February. The personal consumption expenditures (PCE) price index, which excludes food and energy, increased 0.3% for the month, lower than the 0.4% Dow Jones estimate and the 0.5% increase in January.

The report also revealed that the core PCE, which measures the price of goods and services except food and energy, increased by 4.6% on a 12-month basis, slightly lower than the level in January. Including food and energy, headline PCE increased 0.3% monthly and 5% annually, compared to 0.6% and 5.3% in January.

This softer-than-expected data came with monthly energy prices decreasing by 0.4% while food prices rose by 0.2%. Goods prices rose by 0.2% while services increased by 0.3%.

The report also showed that personal income increased by 0.3%, slightly above the 0.2% estimate, while consumer spending increased by 0.2%, compared to the 0.3% estimate.

Following the release of this report, the stock market futures held higher, while longer-duration Treasury yields declined. Bitcoin prices increased by 2%, trading at $28,445, and ETH increased by 3%, trading at $1,829 at the time of writing. Altcoins such as SOL, DOT, LINK, ADA, and XRP also rose by up to 5%.

Source: Coin360

The market pricing on Friday morning indicated a slight bias towards the Federal Reserve raising its benchmark rate another quarter percentage point in May. The Fed’s own projections, released last week, indicated that there might be one more increase this year and no reductions. However, traders expect cuts this year, with end-year pricing for the federal funds rate at 4.25%-4.5%, half a point below the current target range.

Inflation has remained pernicious in some areas, particularly in shelter costs, which have risen sharply. Fed officials, however, are looking through that increase and expect rents to decelerate through the year. Despite the current bank turmoil, officials have said that they remain focused on bringing down prices.

Data released on Thursday suggested that the problems in banking may be at least under control. Borrowing through two emergency Fed lending programs decreased slightly last week, indicating that there has been no frantic liquidity dash for banks that may be undercapitalized.

In conclusion, the recent inflation report has provided some hope that interest rate hikes are helping ease price increases. While inflation is expected to remain above the Fed’s 2% target into 2024, the Fed remains focused on bringing down prices despite the current bank turmoil.

#PCE #FED #crypto2023 #BTC #azcoinnews

This article was republished from azcoinnews.com