The Kobeissi Letter, a valued analyst within the financial world, states that the US central bank must choose between running inflation or a recession. It is therefore about choosing between two evils, and with that The Kobeissi speaks letter of “the worst nightmare of the US Central Bank, which has become even worse.”
The American economy is shrinking
On Wednesday, April 30, the financial market was startled by the news that the US economy had shrunk by -0.3%in the first quarter of 2025.
According to The Kobeissi Letter, that was a shock because there was a growth of +0.3%. “To make it all worse, the GDP Price Index (an inflation meter) shot to +3.7% for the highest level since August 2023,” said the analyst.
The question is of course how the US central bank should respond to that. On the one hand, inflation seems to rise, while on the other hand the economy is shrinking.
That is how it starts to look more and more like stagflation, and that is of course the absolute doom scenario for economists and central bankers. That is the last thing they are waiting for.
A huge change
The fact that economic growth in the United States yesterday came to -0.3% was not a surprise for everyone. At the gambling markets of Kalshi and Polymarket, we saw negative numbers on the scenes appear before the data came out.
Yet we cannot deny that it is a big change, because the expectation was not long ago that the economy would grow by +3.0% or more during the first quarter.
A lot has simply changed in recent months, and that of course has everything to do with Donald Trump and his trade war. However, the question is to what extent we can connect conclusions to this data, because the imporhteffines ensure a lot of noise.
For example, many American companies have done strong purchases in the past quarter, so that the heading “import” has been on economic growth in recent months.
At the same time, domestic private expenses remained up to date, and we even saw a +3.0% appear on the signs for consumers and companies. There seems to be little wrong with that, so it seems too early to really panic.
That conclusion was also drawn on the market, because Bitcoin is still around $ 95,000 for the time being.
Source: https://newsbit.nl/fed-zit-klem-inflatie-of-recessie-wat-kiezen-ze/
