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SEPTEMBER 7, 2023

LENDING TO BE EXPANDED

Coinbase Global is taking steps to expand its lending services to its largest clients. This move is aimed at addressing the challenges faced by the cryptocurrency lending market, which has suffered from market volatility in recent times. The well-known cryptocurrency broker is now offering standardized lending services, similar to those provided by traditional finance prime brokerages, through its newly launched lending program for institutional investors. Under this program, institutional clients can lend their digital assets to Coinbase and receive collateral that surpasses the loan’s value. In return, Coinbase can then provide secured loans to these institutional clients. This expansion is particularly noteworthy, considering that other players in the industry have faced bankruptcy. However, it is important to note that Coinbase has faced regulatory concerns regarding its lending services in the past.

UNEXPECTED DECREASE

According the U.S. Department of Labor, there has been an unexpected decline in the number of Americans applying for new unemployment benefits last week. This indicates that the job market in the U.S. remains highly competitive and could potentially influence the monetary policy decisions of the Federal Reserve. The figures show that initial claims for jobless benefits stood at 216,000 for the week ending September 2, marking a decrease from the slightly revised 229,000 in the previous week. This trend came as a surprise as economists had predicted a rise to 234,000. Furthermore, the four-week moving average, which helps smooth out weekly fluctuations, also slightly decreased to 229,250.

OPTIMISTIC OUTLOOK

Based on recent economic data, it is evident that the U.S. economy has remained strong, and this has led to an optimistic outlook with experts reconsidering their growth forecasts for the upcoming years. Recent reports, ranging from consumer spending to residential investment, have surpassed expectations and boosted economists’ forecasts for gross domestic product (GDP). In fact, an unofficial estimate from the Atlanta Fed even suggests a potential 5.6% annualized GDP expansion in the third quarter. This starkly contrasts with earlier predictions of a slowdown. As a result, Federal Reserve officials are now considering revising their projections for interest-rate cuts in 2024 and potentially scaling back the anticipated easing measures for next year.

DIFFERING VIEWS ON RECESSION

Despite the recent positive outlook on the U.S. economy, Deutsche Bank remains skeptical and believes that a recession is more likely than a smooth economic slowdown. The reason for this concern is the Federal Reserve’s efforts to control inflation by tightening monetary conditions. Deutsche Bank analysts argue that given the inflation rate surpassing the target, the Fed should take a cautious approach and tighten policies more than necessary. Additionally, while some investors are optimistic that the Fed can lower inflation without harming the economy, Deutsche Bank suggests that the Fed will need to reduce demand in order to reach their inflation target. This might result in pressure on the U.S. economy, which could become noticeable early next year. Nonetheless, not all banks agree with Deutsche Bank’s, such as Goldman Sachs, which recently revised its recession forecasts and now estimates a lower probability of a recession within the next 12 months from 20% to 15%.

ESCALATING COSTS

Based on recent data from benefits consulting firms Mercer and Willis Towers Watson, health insurance costs are projected to increase around 6.5% for employer coverage in 2024. This would be the largest increase in over a decade and could further burden businesses and workers. The rising costs are influenced by factors such as higher labor costs for hospitals and the demand for expensive diabetes and obesity drugs. Individual insurance plans sold under the Affordable Care Act are also expected to see a 6% premium increase next year. Many employers will be shouldering most of these cost increases due to a tight labor market. Consequently, employees may experience higher out-of-pocket expenses for their healthcare. This surge in health insurance costs could potentially impact companies and individuals alike, as healthcare expenses are already a significant financial burden.

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