CPI and FOMC This Week

Hey everyone and thanks for jumping back Into the macroverse today we're going to Talk about the upcoming CPI report and Fomc meeting this week and the general Implication on risk assets if you guys Like the content make sure you subscribe To the channel give the video a thumbs Up and check out into the cryptographers Premium at into the cryptiverse.com Year-over-year inflation is coming in Right now at about 7.7 at least when you Look at headline inflation General Consensus though for the CPI report on Tuesday is 7.3 percent expectations for Core inflation on Tuesday is 6.1 percent The market is currently expecting on Wednesday a 50 basis point rate hike With a 75 probability of occurring and a 25 chance of it actually being a 75 Basis point rate high my general Expectations throughout this year is That the federal funds rate would Continue to climb higher despite a lot Of people's expectations and that we Would likely make it to the four to five Percent range by the end of the year I Do think the terminal rate at least in The short term is probably around five Percent and if I had to guess I I might Even say the range is between somewhere Between five to five and a half percent For the terminal rate on the FED funds Um the FED funds rate now will the next Interest rate hike be only 50 basis

Points if you go back and and look at The prior videos that I did I was fairly Um you know I I expected that we would See 75 basis point rate hikes Essentially every single time now I Actually do think the highest Probability an agreement with the market Here is that it will likely be a 50 Basis point rate high not only because The market is expecting it as you can See on this chart but also because Powell said as much that they're likely Leaning towards lowering the interest Rates as early as December and and if That's the case then we are in fact in December and they reserve the right to Cut it down to 50 basis points because Of the lagging effects that interest Rate have interest rates have on the US Economy my general expectation is that It likely will be a 50 basis point rate Hike finally coming down from the fourth 75 basis point rate height to get us Down to 50 unless inflation comes in hot So if inflation comes in at either Expectations or below expectations I Think that the FED funds rate will Likely only go up by 50 basis points However if inflation comes in very hot And well above General expectations then I I still think the FED reserves the Right to go for a final fifth 75 basis Point rate hike and if they do go with a 75 basis point rate hike I I think that

Will be the last one for quite some time And that they would certainly lower it After that my expectation though is that Unless inflation comes in extremely hot They will go with a 50 basis point rate Hike on Wednesday and so I think it's Worth watch it's worth closely watching Tomorrow where inflation comes in so it Should come in on Tuesday depending on I Shouldn't say tomorrow depends on when You watch this video but it is going to Come in on Tuesday December 13th and Depending on where it comes in I imagine Could have implications on what the Federal Reserve decides to do now Remember in the short term a surprise to The downside if inflation comes in lower Than expected could send risk assets Higher the the main thing that we have To constantly remind ourselves of is That these interest rate hikes that we Talk about Inflation while while they are meant to Bring inflation back down you'll notice That every single time for the most part That inflation goes up We end up going into a recession while It's high or right after it comes back Down and the reason is because the in my Opinion of course is that the Federal Reserve has raised rates and it pushes The U.S economy into a recession okay And and so right now we're not really Looking we're not seeing any clear signs

Of a recession yet the unemployment rate Remains low Despite you know the the best efforts by The Federal Reserve to loosen it up it's Storming somewhat low but inflation Still Remains somewhat high and we know Within the business cycle the Unemployment rate is usually one of the Last things to finally go up to sort of Complete that cycle if you go look at at Interest rates and and where they Currently sit again we know the FED Funds rate is already at around four Percent but furthermore I think what you Should you know what you should Especially take note of is just how Quickly that the FED funds rate has gone Up this hiking cycle and we know that Based on historical what we've seen Historic quickly it can take about a Year before these interest rate hikes to Be felt throughout the economy so while The short-term implications of of you Know lower inflation and potentially a Lower interest rate hike while it might Lead to some relief and risk Assets in The short term I still think it would be Somewhat premature to celebrate the end Of the bear Market until we see the Longer lasting effects of these interest Rate hikes in 2023 remember if you just Simply go take a look at the yield curve And the spread on the on some of these Yields if you look at the spread on the

Three month and 10-year or the two year And the ten year what it shows is a Fairly deep inversion and these Inversions are often followed by Recessions which is where the S P 500 Normally bottoms with the exception of The.com Crash where it actually bottomed After the recession probably because of What actually happened in 2001 if you Think about what was going on during That time so marginal expectation is That as we get out into 2023 we will Likely continue to face macro headwinds Because we're going to have to sort of Face up to to the music that all these Interest rate hikes will likely have an Impact on the U.S economy and and it Likely will send us into a recession in The short term though Um you know if inflation comes back down And the FED is is a little bit less Hawkish on their on their interest rate Hikes you could continue to see a little Bit of relief to risk assets I mean I Think Bitcoin is is right around 17.2 K Right now so it's it's basically Relatively unchanged over the last few Weeks it's moved up a little bit and if It continues to push higher we still of Course have the major resistance of the Of the bear Market resistance band that Sits just above 19 000 but anyways Hopefully that is at least somewhat Insightful CPI on Tuesday fomc on

Wednesday likely going to be 50 basis Points unless CPI comes in Well above expectations and if that's The case if it does come in well above Expectations and we get another 75 basis Point rate hike then I I think you're Likely looking at the s p you know sort Of just continuing on with its Structural bear Market okay if on the Other hand it comes in lower and the FED Provides a somewhat Dove surprise and You could see risk assets continue to Rally but even if they break this trend Line we still have to face the music in 2023 of of lower earnings liar likely Lower earnings and a potential recession That's where we currently stand that's My general expectation hopefully it Hopefully find it useful if you do make Sure you check out into Thecryptiverse.com we do have into the Cryptographers premium there we also Have a telegram Channel you can find a Link to that in the description below Thank you guys for tuning in make sure You subscribe and I'll see you guys next Time bye