Markets ignore a warmer than expected inflation report and instead refer to their attention to the latest signs that the US labor market is faltering shifts in focus, pointing to growing concern over a deeper financial slowdown.
Consumer prices rose slightly more than expected August, according to CPI data, published on Thursday by the US Bureau of Labor Statistics. Both the heading rate of 2.9% and the core percentage of 3.1% remains solidly higher than the Federal Reserve’s 2% target. Normally, it suggests that the US central bank should keep rid of interest collections.
But investors flashed hardly on the data and instead focused what is typically the less subsequent weekly initial unemployed demands from the Ministry of Labor. These data showed claims that increased to 263,000 last week – the highest in almost four years and up from 236,000 the previous week and 235,000 forecast. This focus was reflected in the bond yield, with 10-year tax returns sliding five basic points to less than 4% for the first time since April-Tariffanics refueled global stock markets.
Crypto markets initially dipped the faster than expected inflation data, but rebounded quickly as the employment data took the center. Bitcoin and ether (Eth) is only modestly higher, but the larger action is in Altcoins, which suggests the kind of expensive liquor one had to associate with monetary policy by becoming much easier. Solana has risen 11% week-over-week to its highest level since January and Dogecoin 17% on a weekly basis. XRP is ahead 6.6% over the past week and back over $ 3.
“Proof of a slowdown in the United States is now appearing in the hard data; it’s no longer just in the mood surveys,” said Brian Coulton, chief economist at Fitch.
As for the real economy, today’s numbers offer a troubled glimpse of something that the US central bank has worked hard to avoid: Stagflation. This economic state, defined by the simultaneous occurrence of high inflation and stagnant growth, is rare and difficult to solve. For decision makers it is a catch-22.
Declaration of interest rates to stimulate growth risks that emphasize inflation. But the lack of relief of monetary policy, while the employment situation worsens, is not a much better alternative.
For the time being, the traders are betting that Fed will lean against protecting growth in terms of identifying inflation, with odds pointing to a rate cut next week as an almost security. Today’s data, however, suggests that the balance will be more difficult to manage, and in the future it can be more complicated than the market is pricing.
“It will be a rough couple of months ahead as the tariffs influence work through the economy,” said Heather Long, chief economist at the Navy Federal Credit Union. “Americans will experience higher prices and (probably) More redundancies. “
