U.S. inflation and consumer spending have recently seen a surge, fueling expectations of another Federal Reserve Hike. The US Bureau of Economic Analysis reported that the Personal Consumption Expenditures (PCE) Price Index stood at 4.4% in April 2023 compared to 4.2% in March. This has led experts to advise investors to brace themselves for the Fed Hike.
Interestingly, this is the first monthly recorded increase in PCE inflation since October 2022. It is worth noting that the PCE is the most preferred indicator utilized by the Fed to measure inflation. Projections now suggest that interest rates futures are anticipating a 25 bps rate hike in June, with the probability of a hike in June standing at 57%. Additionally, there is a 27% chance of another hike in July.
On the other hand, investors can expect an interest rate cut after November, with the market now expecting only one rate cut in 2023. This is a considerable shift from just two weeks ago, where no further rate hikes were expected, and investors anticipated around four cuts. There are now predictions of at least 70% chance of two or more hikes in the future.
Despite the rise in inflation data, the financial market remains seemingly unaffected for now. Stock prices rose regardless of the looming deadline on the debt ceiling. The Dow Jones Industrial Average (INDEXDJX: .DJI) climbed by 341 points, revealing a 1.02% increase. Similarly, the S&P 500 (INDEXSP: .INX) gained 48 points and the Nasdaq Composite jumped by 218 points.
While higher inflation may bring about increased interest rates, it is essential for investors not to overlook possible benefits. Tightening the monetary policy may curb inflation and subsequent hikes, bringing some degree of stability to the market. However, critics argue that these benefits may come at the cost of slowed economic growth and impeding development.
As always, the market conditions remain dynamic, and it is crucial for investors to thoroughly research and follow expert advice before making decisions in the cryptocurrency market. Author and publication opinions should not solely dictate financial decisions, as personal responsibility is paramount in preventing financial loss.