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Weekly MacroSlate: A hotter than expected CPI print means a vicious stagflationary environment awaits Bitcoin

TL;DR

U.S. CPI sparks upward revision to the expected fed-funds rateU.K. stays top of the G7 inflation league, with actual CPI year-over-year of 9.9%GBP saw new lows against the U.S dollar, same levels as 1985There’s a 30% probability of a 100bps rate hike in the next FOMC meetingEthereum’s highly anticipated merge took place on Sept. 15 and was successfulGoldman Sachs prepares for layoffs as deal-making slowsFedEx CEO says he expects the economy to enter a ‘worldwide recession’ due to a big miss in earningsBitcoin’s hash rate hits an all-time highBitcoin difficulty adjustment hits all-time high

Macro Overview

CPI sparked a revision upwards to the expected fed-funds rate

Another upside U.S. inflation report sank hopes of the pace of policy tightening, which sent fixed-income yields and the dollar soaring. U.S. equities plunged in the worst one-day loss since mid-2020, with the expectation now on the fed to hike 75 bps next week. Core and headline inflation exceeded forecasts which caused investors to abandon previous assumptions of a 50 bps hike.

Consumer Price Index (CPI) is the index of the variation in prices for retail goods and other items. Headline CPI came in hotter than expected, as traders were convinced we were at ‘peak inflation,’ which sent markets into turmoil. Nasdaq closed 5.5% lower, Bitcoin fell below $20,000, and gold traded 1% below the previous close. 

The two-year treasury rate is the yield received for investing in a U.S. government-issued security with a maturity of two years. The two-year yield is included in the shorter yield curve, which is an important indicator when observing the U.S economy. A big sell-off occurred in treasuries weighted to the front end that saw the two-year treasury reach its highest point since November 2007. 

CPI Inflation: (Source: U.S. Bureau of Labor Statistics)

Headline inflation slowed from 8.5% to 8.3% thanks to a 10.6% monthly decline in gasoline, while other indexes also fell, including airline fairs and used cars. However, this was offset by a rise in food, shelter, and medical services. 

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