Breaking: Inflation Numbers Are Out! What It Means For The Fed, Crypto, and your wallet.

The CPI numbers are out and even though they fell within range of expectations there are still plenty of surprises in store. 

Go to BLS for July CPI numbers

Expected 2.8% came in at 2.7%

Core expected 3% came in 3.1%

MoM picture is prices continue to rise at moderate rate

Context:

  • CPI was up 2.7% in June: led by Shelter, Energy (gasoline went up 1%), Food

  • Core CPI was up 2.9%

  • What is the source of the inflation: tariffs? 

    • June 4th: Steel and Aluminium tariffs 25-50%

    • June 12th: Steel tariffs to include Appliances

    • China tariff reduction 10% 20 more days

    • If tariffs -> big change in Appliances, New Vehicles. 

    • WW Tariffs went into effect August 1st so maybe didn’t go through to consumer yet?

Reaction

  • Analyst - Bloomberg

  • Market - Up on the news. Expecting Fed to cut rates

Implications

  • Fed mandate is to maintain employment and price stability

  • Higher core inflation complicates the case for rate cuts—especially with mixed labor data.

  • Fed in a normal administration the Fed would not cut rate at this point BUT politically they may have to.

  • ↓ inflation → Expect earlier rate cuts → USD weakens.

  • Mortgage - Inflation expectation moderate + Fed Cut -> Lower mortgage rates

  • Crypto - If fed cut rates and lending rates go down then investors can take more risks

What to do about it?

  • Crypto:

    • Increased demand for Crypto

    • Avoid stable coins since USD down

  • Real estate/investments:

    • Inflation hedge, real assets, Mortgage rates down

  • Stock Markets: Stay Defensive I expect a significant correction by EOY

  • Personal finance: Not a good time to buy a home. Stay liquid to take advantage of opportunities. High volatility

Keep Reading