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Dogecoin Services CPI has been slightly concerning in recent monthsServices CPI has not fallen as quickly or as far as hopedI am looking for service price inflation to normalise along with wage growth this yearI have become more reassured that we are proceeding towards inflation normalisation at a reasonable paceWeaker than expected productivity growth could be a risk to the outlook The jobs forecasts are converging on a pessimistic outlookRisks are shifting to lower inflation and higher unemploymentBoE’s Taylor voted to cut the Bank Rate by 25 bps at the last policy meeting because of “substantial forecast revision” to inflation and high-frequency indicators seeing inflation returning to target this year. He expected inflation expectations to moderate significantly due to easing inflation, softer price-wage dynamics and emerging slack. He added that he now places even more weight on the central and downside scenarios. He expects to reach the 3% neutral rate earlier than anticipated.As a reminder, the BoE surprised with a dovish hold at the last meeting as 4 members dissented for a rate cut versus 2 expected. Moreover, they changed the guidance in the statement from “the bank rate is likely to continue on a gradual downward path” to “the bank rate is likely to be reduced further”. Inflation forecasts were also revised substantially lower.Last week, the probabilities for a rate cut in March increased to 75% following the much weaker than expected UK labour market report on Tuesday and mostly benign UK CPI data on Wednesday.
This article was written by Giuseppe Dellamotta at investinglive.com.
💡 DMK Insight
The recent Services CPI data is a mixed bag for traders, hinting at persistent inflation pressures that could impact monetary policy. While the expectation is for service price inflation to normalize alongside wage growth, the current trajectory suggests that inflation isn’t cooling as quickly as many had hoped. This could lead to a more cautious approach from the Fed, potentially delaying interest rate cuts that traders have been banking on. If inflation remains sticky, we might see volatility in both the forex and crypto markets, as traders adjust their positions based on interest rate expectations. Keep an eye on correlated assets like gold and the USD, as shifts in inflation sentiment can lead to significant price movements. Watch for key economic indicators in the coming weeks, especially any shifts in wage growth data, which could serve as a leading indicator for inflation trends. If wage growth accelerates without a corresponding drop in service prices, it could signal a more entrenched inflation scenario, prompting a reevaluation of current trading strategies.
📮 Takeaway
Monitor wage growth data closely; if it accelerates without a drop in service prices, it could signal persistent inflation and impact interest rate expectations.
