Circle announces new blockchain amid blockbuster earnings

Key Points

• Inflation Update: Core inflation, excluding food and energy, rose 0.3% month-over-month in July, the largest increase in six months, with annual core prices up 3.1% from 2.9% in June.**
• Headline CPI: The Consumer Price Index increased 2.7% annually in July, matching June's rate but below the expected 2.8%, with a month-over-month rise of 0.2%.**
• Tariff Impact: Evidence of tariff-related price increases emerged, notably in footwear (up 1.4%), though not yet at alarming levels, amid a US effective tariff rate of 18.6%, the highest since 1933.**
• Federal Reserve Outlook: Despite sticky inflation, the report supports a potential Fed rate cut in September, with a 90% probability of a 0.25% cut, though future cuts may face complications from tariff-induced inflation.**
• Market Reaction: Stocks rose post-report, and the 10-year Treasury yield stayed below 4.3%, reflecting market optimism for Fed rate cuts.**

Summary

Inflation remained persistent in July, with core inflation (excluding food and energy) rising 0.3% month-over-month, the highest in six months, and 3.1% year-over-year, up from 2.9% in June, per the Bureau of Labor Statistics. Headline CPI held steady at a 2.7% annual increase, below the expected 2.8%, with a 0.2% monthly rise driven by lower gasoline and softer food prices. Specific categories like footwear (up 1.4%), furniture, and airline fares saw notable increases, hinting at tariff-related cost pass-through as the US effective tariff rate hits 18.6%, the highest since 1933. Despite sticky inflation, experts like Seema Shah from Principal Asset Management believe the data won't deter the Federal Reserve from a potential rate cut in September, with investors now estimating a 90% chance of a 0.25% cut. However, future inflationary pressures from tariffs could complicate later rate decisions. Markets reacted positively, with stocks rising and the 10-year Treasury yield below 4.3%, reflecting optimism for monetary easing. The report underscores ongoing trade policy impacts and raises questions about the Fed's balancing act between inflation control and economic growth.

Key Points

• Do Kwon, co-founder of Terraform Labs, plans to plead guilty to two charges of conspiracy to defraud and wire fraud in a U.S. court.
• Kwon is accused of misleading investors about TerraUSD, a stablecoin, by falsely claiming a computer algorithm restored its value in 2021, when he allegedly manipulated its price.
• The collapse of TerraUSD and Luna in 2022 resulted in an estimated loss of $40 billion for investors.
• Kwon agreed to a $4.55 billion settlement with the SEC in 2024, including an $80 million civil fine and a ban from crypto transactions.
• He has been detained since his extradition from Montenegro and is among several crypto moguls facing federal charges after the 2022 digital token slump.

Summary

Do Kwon, the South Korean cryptocurrency entrepreneur behind Terraform Labs, is set to plead guilty to charges of conspiracy to defraud and wire fraud in a U.S. court. Kwon, who developed the TerraUSD stablecoin and Luna token, is accused of misleading investors by falsely claiming a computer algorithm stabilized TerraUSD’s value in 2021, when he allegedly orchestrated secret purchases to prop up its price. This deception contributed to the $40 billion collapse of both currencies in 2022, impacting retail and institutional investors. Initially pleading not guilty to a nine-count indictment, Kwon now faces sentencing following his plea. In 2024, he settled with the SEC for $4.55 billion, including an $80 million fine and a crypto transaction ban. Detained since his extradition from Montenegro, Kwon is among several crypto figures charged amid the 2022 digital token market crash.

Key Points

• July's Consumer Price Index (CPI) is expected to show a year-over-year increase of 2.8%, up from 2.7% in June, with a monthly rise of 0.2%, slightly slower than June’s 0.3%.
• Core CPI, excluding volatile food and energy prices, is projected to rise to 3.0% annually from 2.9% in June, with a monthly increase of 0.3%, the strongest in six months.
• Tariff-driven cost pressures are emerging, with apparel, footwear, and furniture prices showing monthly gains in June, signaling higher costs reaching consumers.
• Economists note that while tariffs are pushing prices up, consumer fatigue may limit price increases, with core inflation expected to hover around 3% by year-end.
• Markets are betting on a Federal Reserve rate cut in September, with an 87% probability of a 0.25% reduction, amid concerns over inflation and labor market health.

Summary

The upcoming July Consumer Price Index (CPI) report, set for release on Tuesday, is anticipated to reflect a slight acceleration in annual inflation to 2.8% from June’s 2.7%, while monthly price growth slows to 0.2% from 0.3%. Core CPI, excluding food and energy, is expected to rise to 3.0% year-over-year, with a notable 0.3% monthly increase, driven by persistent goods inflation. Tariff-related cost pressures, evident in June with rising apparel, footwear, and furniture prices, are starting to impact consumers, though growing consumer fatigue may temper further hikes. Economists predict inflation will stabilize around 3% by year-end. Amidst these developments and ongoing trade tensions, with U.S. tariffs at their highest since 1933, markets are increasingly expecting a Federal Reserve rate cut in September, fueled by labor market concerns and stubborn inflation. The report will be critical for gauging the broader economic impact of tariffs and the Fed’s next moves.