Consumption has collapsed, but inflation expectations have risen — the Federal Reserve is now "wrong no matter what it does"
On one hand, American citizens feel the economy is doomed.
On the other hand, American citizens believe prices will keep rising.
On August 14, the University of Michigan Consumer Sentiment Index was released — 51.0.
This is a 7.6% drop from last month's 55.2. It is 4 points lower than economists' expectation of 55. This is the first decline in three months.
But in the same report, the one-year inflation expectation rose from 4.2% to 4.3%.
Confidence is collapsing, inflation expectations are rising.
It's like a person saying, "I'm starving," while also saying, "Food prices are still going up."
What do you think they will do next?
The answer is: nothing — because they have no money left.
On the same day, July retail sales data was released — a month-over-month decline of 0.6%.
The market originally expected a 0.1% increase. The gap between expectation and reality is 0.7 percentage points.
Auto sales plummeted 1.8%, and online shopping is also shrinking. Excluding autos, retail still fell 0.3%.
This is not a problem in one sector; the entire consumption basket is collapsing.
Looking at citizens' wages — in July, the real average hourly wage fell 0.2% year-over-year.
Prices are rising, wages are falling, consumption is collapsing.
In the University of Michigan survey, only 8% of consumers expect their income growth to outpace inflation.
92% feel they are getting poorer.
Short-term business environment expectations dropped 11%, and long-term expectations plunged 17%.
Joanne Hsu, head of the consumer survey, said: The confidence drop is most severe among the elderly, low-income families, and those without a college degree — "these groups are especially vulnerable to inflation eroding purchasing power."
In other words: those who can least withstand inflation are feeling it most acutely.
So what does this mean for BTC?
Two completely opposing forces are pulling.
The positive side: consumption has collapsed, retail is down — the necessity for a Fed rate hike in September is decreasing. Money market pricing shows about a 35% chance of a rate hike in September.
If rate hikes stop, liquidity conditions improve — BTC valuation is supported.
The negative side: inflation expectations remain at 4.3% — more than double the Fed's 2% target. Chicago Fed President Charles Evans said: "We need to see similar data for the next few months to confirm inflation is steadily returning to the 2% target."
The duration of high interest rates may be forced to extend — risk asset valuations continue to be pressured.
On one side is "the economy is weak, so we need to ease," on the other is "prices are still rising, so we can't ease."
The Fed is not facing "overheated demand" — that is a 2024 issue.
Now it is "inflation still above target + consumption starting to stall."
The Fed faces two paths —
Rate hike → completely kill already collapsed consumption.
No rate hike → let 4.3% inflation continue eroding citizens' purchasing power.
Either way, it's wrong.
What will BTC do in this squeeze?
Most likely continue sideways.
At the beginning of August, BTC was around $63,210. CPI dropped to 3.4%, BTC still hovered between $64K-$66K. After the August 14 data, gold surged to $4,378, BTC still ground below $65K.
The market is waiting — waiting for the Fed to make a mistake first.
But the mid-term direction is only one —
Fiat credit is damaged on both sides,
Bitcoin is the only escape.
Economy collapses, fiat is printed. Inflation rises, fiat depreciates.
No matter which path the Fed chooses, the real purchasing power of the dollar is declining.
Bitcoin doesn't need the Fed to do the right thing — it just needs the Fed to be wrong no matter what it does.
$BTC$ETH$XAU#消费动能转弱，9月政策仍受通胀制约
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