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Potential Delay in Federal Reserve’s Target Interest Rate Recovery Due to Rising Inflation

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On February 21, according to the Bitlinex Alpha report, data showed that the Federal Reserve may raise interest rates by more than 25 basis points in the futur…

Potential Delay in Federal Reserves Target Interest Rate Recovery Due to Rising Inflation

On February 21, according to the Bitlinex Alpha report, data showed that the Federal Reserve may raise interest rates by more than 25 basis points in the future. Inflation intensified in January this year. Although the overall CPI fell year-on-year, some categories of consumer spending showed that inflation continued. All these factors together, the Federal Reserve may delay the recovery of the target interest rate of 2%.

Bitfinex Alpha: In the fluctuation of Bitcoin, inflation rises again

Interpretation of the news:


The Bitlinex Alpha report released on February 21 predicted that the Federal Reserve may raise interest rates by more than the expected 25 basis points, which has been the norm since the central bank initiated a series of rate hikes starting in December 2015. This is due to the intensifying inflation recorded in January of this year, and although the overall Consumer Price Index (CPI) showed a year-on-year decline, inflation continued to affect certain categories of consumer spending.

The rising inflation rate is a major driver in the Federal Reserve’s decision to increase interest rates, as higher rates could help to slow down inflation. However, the report suggests that this trend may be disrupted due to the unique circumstances surrounding the current inflationary environment.

Firstly, the inflation rate has not been evenly distributed across all consumer goods, meaning that certain categories (such as healthcare, education, and housing) are disproportionately affected. The report highlights that these are areas where spending is less discretionary, forcing consumers to pay higher prices despite their intentions.

Furthermore, the report suggests that inflation may continue to rise due to factors such as increased fiscal stimulus, low unemployment rates, and supply chain disruptions. These circumstances could put upward pressure on prices and could potentially lead to a sustained spike in inflation.

The combination of these factors could influence the Federal Reserve’s decision to delay the recovery of the target interest rate of 2%, as higher rates could further exacerbate the situation by making it more expensive for consumers and businesses to borrow money, which in turn could hamper economic growth.

In conclusion, the Bitlinex Alpha report paints a picture of a complicated and difficult decision-making environment for the Federal Reserve, who must balance the need to control inflation against the desire to promote economic growth. While the rising inflation rate is an obvious concern, the report highlights that the uneven distribution of price increases and the potential for further inflationary pressures make the decision to raise interest rates even more challenging.

Keywords:
Federal Reserve, interest rates, inflation, CPI, consumer spending.

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