Latest inflation data comes in hotter than expected, led by housing costs

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Structural sticky inflation is here

Todays inflation data tells a story of sticky prices that are going to have a lot of trouble coming down and getting us back to the 2% target.

Off the top, the key data points vs. expectations:

• Core CPI MoM: 0.3% actual, 0.2% expected
• Core CPI YoY: 3.3% actual, 3.2% expected
• Headline CPI MoM: 0.2% actual, 0.1% expected
• Headline CPI YoY: 2.4% actual, 2.3% expected

As we can see, the CPI print was hot. Not smoking hot, and also not because any major outliers drove it higher. What were seeing is really just a broad-based inability for inflation data points to meaningfully move lower.

Before digging into the hot points, let‘s quickly run through what accounts for 55% of this month’s inflation: shelter.

Following a rebound last month, owner-equivalent-rent and primary rents both continued their trajectory lower, leading to shelter inflation coming in at 0.22% MoM vs. expected 0.46%. By all accounts, this was a positive outcome for disinflation.

That‘s about as far as we can go in terms of positive data points in today’s print.

The big red flag is that core goods rebounded higher at 0.17% vs. the anticipated 0.02%. Goods MoM deflation has been the core driver of the disinflation story we‘ve seen this year and which has allowed the Fed to cut with confidence. So if we’re beginning to see a rebound in goods inflation, that will be a concern.

Overall, todays CPI print paints a picture of sticky inflation, but not re-acceleration. I think this print will still allow the Fed to cut by 25 basis points in November, but 50bps is surely off the table at this point.

— Felix Jauvin

$24

The price target (in CAD) for Galaxy Digital, according to a Thursday note from HC Wainwright & Co., which started covering the stock. The companys share price closed at $17.73 CAD on Wednesday.

Galaxy is one of just two diversified crypto-focused public companies (outside of the bitcoin miners) with a market cap of more than $1 billion, the analysts wrote. And an expected sharp crypto rally starting in Q4 could be the single biggest driver of a Galaxy stock price increase.

The HC Wainwright & Co pros added: “Further, institutional understanding and adoption of digital assets has never been greater, and we see a wave of incremental institutional capital pouring into the space in the coming years, further amplifying the upcoming bull market.”

On the ground at Permissionless

Day two of Blockworks‘ Permissionless was in progress when this newsletter went out, but let’s take a look at some of what people were talking about on day one.

There seems to be a calm before the storm. And were not talking about Hurricane Milton (our thoughts are with everyone in the affected areas and their loved ones), but rather the seeming holding pattern as we await the Nov. 5 presidential election.

The need for regulatory clarity was mentioned a lot. That‘s not really new, but it is even more highlighted given we’re now just 26 days from the big day.

Casey mentioned some of House Majority Whip Tom Emmer‘s thoughts yesterday about how the presidential election could impact the crypto industry’s trajectory.

Coinbase CLO Paul Grewal said during the same panel that hes looking beyond just the Donald Trump-Kamala Harris match-up.

“Congress is going to matter a lot here, regardless of whos elected as president,” he said.

During a session later in the day, Lumida CEO Ram Ahluwalia argued that Harris — who he called the “presumptive leader of the Democratic party today” — could terminate SEC Chair Gary Gensler before the election if she wanted to.

But he expects to see “status quo” if Harris is elected, implying no quick change in SEC leadership would be made.

While Donald Trump has vowed to fire Gensler, Harris has shared some pro-crypto comments without noting how she might address the agencys current leadership.

Clearing out the leaders with negative views of the industry should be positive for an agency that overall realizes the crypto industry‘s value to capital markets and American innovation, said Bitwise’s Juan Leon.

But, he added in a panel alongside Ahluwalia: “I don‘t think it’s as black and white as people in this industry seem to be thinking. Really what matters is the bipartisan support, which is there.”

While regulation was mentioned in some shape or form in nearly every panel I listened in on, some other points worth noting strayed from strict policy.

In a panel on the future of bitcoin mining, Marathon Digital CEO Fred Thiel seemed to question the strategy of industry rival Core Scientific, which this year has inked high-performance computing (HPC) hosting contracts with cloud-computing firm CoreWeave.

Core Scientific has said it projects more than $4.7 billion in cumulative revenue over the 12-year timeline of the CoreWeave contracts.

But Thiel argued: “Thats a race to zero,” noting that competition in the arena of renting rack space will ultimately hurt margins.

And we can‘t not mention the world’s largest asset manager being in the building.

Samara Cohen, BlackRock‘s CIO of ETF and index investments, said we are in “act one” in terms of institutional crypto adoption. This theater analogy came in lieu of the baseball-focused “early innings” line you typically hear (though Let’s Go Mets, am I right？).

While hedge funds and other asset managers have been jumping in, there remains “a fair amount of plumbing” needed to unlock others ability to buy bitcoin (namely pensions and endowments).

Outside of regulation, investment guidelines consideration and board approval are other hurdles to clear for those asset allocators.

“These things take a longer period of time…and this is a process that is underway,” Cohen said.

— Ben Strack

Bulletin Board

• The SEC on Thursday charged crypto market maker Cumberland DRW with acting as an unregistered dealer. Regulators allege the Chicago-based firm has been “operating as an unregistered dealer in more than $2 billion of crypto assets offered and sold as securities.” In a statement posted on X, Cumberland expressed frustration with being the SECs “latest target” and pledged to defend itself “against overzealous regulators.”
• Initial jobless claims released Thursday showed 258,000 first-time filers for the week ended Oct. 5, marking the highest weekly initial claims since August 2023. Analysts had expected 230,000.
• Permissionless III continues! Check out the day one recap from Blockworks editor Katherine Ross here, and keep an eye on Blockworks.co for the latest updates.