Job Market: Today we once again had our weekly jobless claims report, which is the report showing how many new people have filed for unemployment benefits in the US. Now the reason we want this figure to go up is that the strong job market is fuelling #inflation -> More people working means that more people are making & spending money, which sends demand & inflation up (Or at least keeps it up despite the rate hikes).

However, unfortunately, the jobless claims report remained under 200K for the 7th straight week, which just shows how strong the job market is at the moment, which is also probably one of the contributors to the recent uptick in general demand (Which is very worrying). This means that if the job market doesn't start weakening soon, it could cause inflation to back up. The CEO of JPMorgan Chase (The largest US bank) also warned that inflation has gotten a little out of control again, so we need to get back on track or it could get ugly.

US #GDP: We also got the Q4 GDP Revision, which is when they go back and get a final number on the GDP growth for the quarter. It turned out that the GDP growth was 2.7% vs the previously thought 2.9%. This wasn't the end of the world, as the economy is still surprisingly strong among the many rate hikes (Which are slowly taking their effect now -> or at least they should be).

This is however not the worst thing, as inflation has gone down during this period of economic growth, so in theory, all it does is give the #FED more room to work with before a #recession is caused (Since it would take more to get to that point).

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