Compass Investments

– Independent inflation data indicate a significant slowdown in price growth in the United States, strengthening the case for cheaper borrowing and leading to stronger reverberations for risky instruments, including crypto-assets.

After last week’s decision by the Federal Reserve Board of Governors to pause rate cuts and give no hint of an imminent rate cut, price data shows that regulators may be diverging from the reality of a rapidly improving price environment. Truflation, an alternative inflation monitoring system that aggregates millions of daily price indicators from multiple independent data providers, showed a widespread slowdown in all U.S. price growth indices.

As of Sunday, the U.S. Consumer Price Index (CPI) was 0.86% year-on-year, down from 1.24% the previous day.

The Core Personal Consumption Expenditures (PCE), the Fed’s preferred measure of inflation, came in at 1.38% , well below the central bank’s 2% target.

All of our numbers are calculated daily in annualized percentage terms using millions of data points from dozens of data sources, Truflation said last Sunday.

These figures are in stark contrast to official government figures, which showed annual CPI at 2.7% in December and core PCE at 2.8% in November.

As Cointelegraph has previously covered, the Fed’s interest rate moves have a significant impact on the US dollar, global liquidity conditions and financial markets. Lower interest rates are widely seen as a counter to a rising dollar, which traditionally favors risky assets such as Bitcoin (BTC) and the cryptocurrency sector as a whole.

Recent market signals suggest that the U.S. dollar may be approaching a tipping point where its future trajectory is increasingly determined by technical and structural factors, not just Fed monetary policy.

the U.S. Dollar Index, which tracks its movement against a basket of six major currencies, recently recorded a weekly close below a long-term support line that has held for more than a decade, according to Barchart. This shift could signal further downside risk if the breakout holds.

Macro investors have long expressed the view that a weakening U.S. currency is not just acceptable, but desirable in the current realities. Raul Pal, founder of Real Vision, has previously emphasized that a weaker dollar is necessary and desirable for everyone to service their debt obligations in this currency, especially in a global system heavily burdened by dollar settlements.