Sticky Inflation Strikes Again as Fed Faces Stagflation Trap

Sticky Inflation Refuses to Give the Fed Any Breathing Room

On Tuesday, the PCE price index was published by the Commerce Department’s Bureau of Economic Analysis (BEA), and the latest report shows inflation is still lingering. Basically, it rose 0.2% last month compared to June and around 3.7% from a year earlier. At the same time, Core PCE, a measurement that excludes food and energy, saw a 0.2% rise as well.

What the report shows is that inflation is still above the U.S. central bank’s 2% target even though many expected a July reduction. In essence, the cost of all the things Americans purchase every day increased; they also were paid more, but they did not use the extra funds.

“Personal saving was $712.0 billion in July, and the personal saving rate—personal saving as a percentage of DPI—was 3.0 percent,” the PCE report states.

Nigel Green Warns Stagflation Is Knocking at America’s Door

In a note shared with Bitcoin.com News on Wednesday, the CEO of global financial advisory Devere Group, Nigel Green, detailed that the U.S. economy is flashing a stagflation warning. After the BEA report was published, Green explained that,” Growth is stalling while inflation refuses to fall. Put those two trends together and you get the looming spectre of stagflation.”

Green detailed that the combination puts pressure on the Fed. “A central bank can fight high inflation by raising rates, or it can support weakening growth by cutting them, but not both. This data suggests the U.S. economy may now need both at once,” Green said. The Devere Group executive thinks this will lead to keeping the federal funds rate unchanged.

Green stated:

“Markets are reading a hold as caution. I read it as a Fed that’s run out of good options.”

Markets Barely Flinch as Bitcoin’s Price and Gold Valuations Drift Modestly Lower

The market didn’t budge much following the latest PCE price index reading. Wall Street’s four major indexes were still in the green at market open. Gold prices slid moderately to $4,626 per troy ounce, and silver dropped to $68.31.

Bitcoin’s price too saw a slight decline after breaching the $81,000 range earlier this week. 24-hour intraday values show BTC between $77,250 and $79,539 per coin. At 11 a.m. EDT on Wednesday, BTC is exchanging hands for $77,600 per unit.

Wall Street Turns to Warsh, Jobs Data, and the September FOMC Gathering

Stocks, precious metals (PMs), and crypto asset market watchers will be keeping an eye out on various factors over the next few weeks. This includes the first Jackson Hole keynote from the new Fed Chair, Kevin Warsh, alongside the September Federal Open Market Committee (FOMC) decision. Analysts and strategists will also keep a keen eye on payrolls and the August jobs report before the mid-September FOMC meeting.