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AUGUST 31, 2023

SLIGHT RISE

The latest data from the Bureau of Economic Analysis revealed that inflation in the U.S. increased to 3.3% in July compared to 3% in June, as measured by the Consumption Expenditures Price Index (PCE). Additionally, the Core PCE, which is the Federal Reserve’s preferred measure of inflation, rose to 4.2%, slightly higher than the 4.1% increase in June. Both the PCE Price Index and the Core PCE Price Index increased by 0.2% on a monthly basis as expected. Furthermore, Personal Income grew by 0.2% and Personal Spending rose by 0.8% on a monthly basis. Nevertheless, when looking at the monthly figures, price growth remained relatively stagnant.

EXCHANGE RESERVES FELL

Based on data from on-chain analytics service CryptoQuant, it has been observed that the number of Bitcoin (BTC) held in addresses associated with centralized exchanges has reached the lowest level since January 2018, indicating a notable shift in the market’s sophistication and investor behavior. The exchange reserve has decreased by 4%, totaling 2 million BTC ($54.5 billion), and it can be attributed to various factors, including the growing popularity of services like Copper’s ClearLoop, which allows users to trade without the necessity of transferring funds to centralized exchanges. Moreover, the decline in exchange reserves also signifies a decline in trust towards centralized exchanges, leading investors to adopt self-custody solutions and a long-term investment approach for Bitcoin.

TIGHT ENOUGH

Atlanta Federal Reserve Bank President Raphael Bostic has made a case against further increases in U.S. interest rates, asserting that the existing monetary policy is sufficiently tight to bring inflation back to 2% within a reasonable timeframe. Disagreeing with the majority, Bostic highlighted that recent interest rate hikes have already contributed to reducing inflation from its peak of 9% to 3.2%, citing surveys showing fewer businesses planning price hikes, a decrease in highly inflationary items, and a cooling labor market. Furthermore, Bostic emphazised the importance of exercising caution and patience, urging policymakers to avoid excessive tightening that could inflict unnecessary economic pain, however, he clarified that he does not advocate for easing policy anytime soon.

FEWER CLAIMS

In the week ending August 26, the number of Americans filing for unemployment benefits decreased by 4,000 to 228,000, defying expectations of 235,000 and showing the tightness in the US labor market. The four-week moving average for initial claims, which smooths out weekly fluctuations, remained steady at 237,500. However, continuing claims saw an increase of 28,000 to reach 1,725,000, surpassing the estimated figure of 1,703,000. Additionally, non-seasonally adjusted claims fell by 6,970 to 192,467. This decline was driven by decreases in Ohio, Missouri, and Hawaii, while New York experienced a notable increase of 3,677 claims.

INTERNATIONAL NEWS

According to preliminary data from the European statistics office, inflation in the euro zone for the month of August was higher than analysts had expected. Headline inflation stood at 5.3%, unchanged from the previous month but exceeding the anticipated rate of 5.1%. Food prices remained the primary driver of inflation, although they decreased by 1 percentage point compared to the previous month. Concurrently, core inflation, which excludes volatile items, decreased by 0.2 percentage points and now matches headline inflation at 5.3%. These inflation figures present a challenge for the European Central Bank, with member Robert Holzmann stating that they pose a “conundrum” for the European Central Bank, suggesting the need of carefully considering and navigating the complex factors involved in deciding whether to raise interest rates further or pursue alternative measures.

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