An economist: Market analysis based on US economic data is likely to mislead investors

Economists believe that investors who rely too much on US economic data in their decisions are likely to misinterpret market conditions; Because corporate greed will cause the failure of the Federal Reserve in the inflation control process.

Companies use macroeconomic events to raise prices

To Report BInCrypto’s Samuel Rines, Corbu’s chief economist, said in an interview with the Bloomberg Podcast that the price hikes fueling inflation in the United States are the result of companies using macroeconomic events to test consumer tolerance.

He argued that PepsiCo used a 4% loss in revenue in Russia due to the country’s military attack on Ukraine to justify a double-digit price increase. Then, other competitors such as Coca-Cola, Dr. Pepper and Snapple did the same.

According to Raines, restaurant chain Wingstop also took advantage of the increase in the price of chicken wings to increase the price of its food. They continued to raise prices even when raw material prices fell by 50% to test how much consumers would pay. Average American businesses are testing consumers with higher prices and wages, he said.

Raines notes that while hotel and cruise ship clientele has not returned to pre-Covid-19 levels, room rates and booking fees have increased significantly.

Is a misinterpretation of the market scaring away cryptocurrency investors?

While the CME FedWatch tool points to a 0.5 percentage point rate hike in March 2023, Federal Reserve Chairman Jerome Powell told congressional committees earlier this week that In order to bring inflation to 2%, the central bank will probably need to revise its target interest rate.

He also added that the Fed may moderate the pace of interest rate hikes if they fuel inflation.

However, Raines argues, ignoring the rampant corporate profit-seeking could mean the Fed’s rate hikes will never end. Thus, even digital currency investors should adjust their investment portfolio based on another interpretation of the conditions; Because, with increasing inflation, we will continue to see stagnation in the market.

This economist noted:

Since I imagine it will be very difficult for the Federal Open Market Committee to get out of inflation, we will assume that interest rates will rise by 0.25 percentage points each month until companies cut their prices.

Reiner warned that the next few months will see a slight increase in the CPI and other inflation indicators, and while you may be happy that the Fed probably won’t have to raise interest rates to 5.5% to 5.75%, an increase The suddenness of the prices by the companies will surprise you.

Bitcoin critic Peter Schiff also argues that raising interest rates would be pointless if they did not encourage people to save. He also believes that this trend shows that investing in digital currencies should be based on a different analysis of economic conditions.

The purpose of raising interest rates is not to put people out of work, but to keep people working, but with less spending and more savings. To date, this process has not made any progress in achieving this, so (the Federal Reserve) will not be successful in reducing the inflation rate to the range of 2 observations.

Jerome Powell said earlier that the release of US consumer price index and personal consumption expenditure index data will influence how much the Federal Reserve raises interest rates at the next meeting of the open market committee.