Economic data released in the United States on Wednesday sparked concerns as Core PCE inflation rose to 2.8% for October.
The Personal Consumption Expenditures (PCE) report reflects the average amount of money consumers spend each month and is used by central bank policymakers as a leading indicator of inflation.
“The Fed’s worst nightmare is now coming true,” said , adding that this week’s data confirmed that all three inflation indicators are back on track.
These reports have shown a rise in the cost of living in the US since July, and now all three inflation indicators are also up.
“For the first time since February 2022, Core CPI, PCE, and PPI inflation are now rising simultaneously.”
also noted that Core CPI has remained above 3% for 42 consecutive months, the longest period since the early 1990s, “which effectively means we are in double-digit inflation.”
President-elect Donald Trump’s proposed tariffs on China, Canada, and Mexico also have the potential to push up consumer prices and push inflation back up.
This week, Goldman Sachs economists predicted that the tariffs would have a direct impact on Personal Consumption Expenditures.
“Using a simple rule of thumb that states that every 1% increase in the effective tariff rate increases core PCE by 0.1%, we estimate that the proposed tariff hike would increase core PCE prices by 0.9% if implemented,” they said.
Rising inflation means the Federal Reserve (Fed) could return to a more hawkish stance by halting interest rate cuts or even raising rates again.
After first starting rate cuts with a 50 basis point cut in 2008, the Fed is now concerned by comments from its chairman, Jerome Powell, who recently said the central bank is “in no rush” to cut interest rates.
High interest rates typically have a negative impact on risky assets like crypto as less risky cash-related investments become more attractive. Furthermore, higher interest rates mean less liquidity and more money available for investment due to less borrowing.
Despite this, the crypto market continued to show positive momentum this week, with total capitalization reaching $3.5 trillion again, mainly driven by Ethereum and altcoins.
