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SEPTEMBER 20, 2023

CRACKDOWN CONTINUES

The U.S. Securities and Exchange Commission (SEC) is actively targeting crypto exchanges and DeFi projects that violate securities laws, following in the footsteps of Coinbase and Binance. David Hirsch, head of the agency’s Crypto Assets and Cyber Unit, confirmed that the SEC is investigating other firms engaged in similar activities and intends to bring charges against them. The SEC is currently involved in intricate crypto cases in federal courts, although not always achieving favorable outcomes, as seen in the recent Ripple ruling appeal. Hirsch emphasized that the SEC’s interest in the crypto industry extends beyond exchanges, encompassing intermediaries such as brokers, dealers, and clearing agencies. Even DeFi projects will not escape scrutiny. The SEC’s enforcement approach has become more assertive due to the potential risks associated with allegations against digital asset companies. However, the SEC’s resources are limited, preventing them from pursuing all tokens and centralized platforms directly.

THE REAL FOCUS

The Federal Reserve is expected to keep interest rates unchanged, generating confidence among investors. However, the focus has shifted to the release of new forecasts that will provide insights into the central bank’s perspective on achieving a “soft landing” for the economy and the accompanying interest rate environment. The updated Summary of Economic Projections will determine whether policymakers believe recent positive economic data, such as lower inflation and robust job and economic growth, can be sustained. It will also indicate if more restrictive monetary policies will be necessary to combat rising prices, risking a potential halt to the post-pandemic economic expansion. Moreover, forecasts are expected to undergo revisions, including upgrades to growth and the labor market, a downward revision to inflation for 2023, and possibly one more rate hike this year. Furthermore, the projections will shed light on how long high interest rates will last, when inflation will return to target, and the anticipated economic slowdown and rise in unemployment.

RECORD-BREAKING RISE

The Mortgage Bankers Association (MBA) has reported a considerable increase in mortgage applications in the U.S. for the week ending on September 15, as applications rose by 5.4%, marking the highest surge since mid-June. This growth was primarily driven by a 13.2% jump in applications for refinancing home loans, as well as a 2.3% rise in applications for purchasing homes. These numbers reflect a growing trend of homebuyers seeking to refinance or purchase homes. However, the average contract interest rate for 30-year fixed-rate mortgages also rose, reaching 7.31%, the highest level since December 2000. According to Joel Kan, an economist at the MBA, potential homebuyers are facing challenges due to higher rates and limited inventory available for sale.

SOARING PEAK

According to the latest report released by the Institute of International Finance, global debt has reached a new record high of $307 trillion. The report revealed that in the first half of 2023, debt surged by $10 trillion, surpassing levels seen a decade ago by an astounding $100 trillion. This rise in debt can be attributed to the high interest rate environment experienced across most economies. Consequently, the global debt-to-GDP ratio now stands at approximately 336%, up from 334% in the fourth quarter of 2022. This ratio had been declining for seven consecutive quarters before resuming its upward trajectory. The spike in worldwide inflation, along with higher borrowing costs and tighter lending standards, played a significant role in the increase. Furthermore, it is worth noting that mature markets such as the U.S., the U.K., Japan, and France accounted for over 80% of the debt build-up. On the other hand, emerging markets like China, India, and Brazil witnessed the most significant increase in debt. Moreover, the report also highlighted the alarming levels of domestic government debt in many emerging market countries, which the current global financial architecture is ill-prepared to manage.

INTERNATIONAL NEWS

Britain’s inflation rate has taken an unexpected dip to its lowest level in 18 months, raising the possibility that the Bank of England may halt or even reverse its recent string of interest rate hikes. According to the Office for National Statistics, the Consumer Prices Index rose by 6.7% in August compared to the previous year, which was slightly lower than the predicted 6.8%. This surprising development has prompted investors to lower their expectations for future tightening measures from the Bank of England, leading to a depreciation of the pound. The report also signals a shift in focus from inflation concerns to a more cautious outlook for economic growth. Despite the decline in inflation, there remain lingering worries about high domestic price pressures and the need for further interest rate increases.

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