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FED CHAIR JEROME POWELL IS FACING BIG CHALLENGES
He is stuck, and here's why:
• Recently, the US CPI was released exactly as expected at 2.7%, while Core CPI came in below expectations at 2.6%.
• This is nearly identical to the previous CPI release, meaning inflation is no longer "hot."
• This is a major issue for Powell.
Powell maintains high interest rates because the Fed fears inflation could rise. However, in reality, CPI and Core CPI are approaching the Fed's target.
Additionally, Truflation, a real-time CPI tracking tool, reports that current US inflation is below 1.8%.
This means the Fed has been slow to cut rates, while the economy faces pressure from high interest rates. The Fed remains firm despite inflation data showing a decline.
Historical comparison:
• Before the 2024 election, the Fed cut rates by 50 bps, despite market expectations of 25 bps, when Core CPI was 3.3% and unemployment was 4.1%.
• Currently, Core CPI is 2.6%, unemployment has risen to 4.4%, yet the Fed maintains a tightening stance.
It is highly likely that the Trump administration had prior knowledge of this CPI data, which may explain their focus on Powell.
No matter what Powell says, the reality is that the Fed is behind the curve on necessary rate cuts.
Markets need more rate cuts, and the Fed will have to act in 2026.$XMR
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