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Jim Cramer Warns Inflation May Return As Oil Skyrockets Leaving Crypto Ripe to Rise?

Published September 18, 2023 1:13 PM
Teuta Franjkovic
Published September 18, 2023 1:13 PM

Key Takeaways

  • Rising crude oil prices could lead to increased inflationary pressures on the US economy, says CNBC’s Jim Cramer.
  • Fed’s Chair Jerome Powell might opt to raise interest rates again this week, potentially impacting riskier assets.
  • Cramer believes another rate hike is likely due to the surging cost of oil, which has risen from $69 to over $90 since June.
  • Powell’s primary concern seems to be curbing inflation rather than preserving earnings, jobs, or consumer spending.
  • Crypto markets are anticipated to maintain their consolidation and sluggishness this week.

Rising crude oil prices, according to CNBC presenter Jim Cramer, could trigger a wave of inflationary pressure across the US economy.

Federal Reserve’s chair, Jerome Powell, may decide to raise interest rates once again this week, according  to Cramer in a new episode of Mad Money, which would put pressure on risky assets.

On Wednesday, September 20, 2023, the Fed will announce that it will stop hiking the Fed Funds rate, which is currently at 5.50%. However, Cramer believes that another increase is more possible, particularly in light of the rising cost of oil, which has gone from $69 to over $90 since June.

Oil Boosts Inflation

“Powell is much more worried about stopping inflation than he is about preserving earnings or jobs or corporate balance sheets, or consumer spending for that matter. He has to swim against the tide and talk about whether inflation is still trending lower – an argument that gets harder to make as oil gets higher and higher right,” said  Cramer.

He added  that the price of crude has sneaked up to $90, and it appears to be headed for $100, where the extremely high cost of gasoline may get ingrained in the entire system.

Cramer isn’t certain if this will impact the Fed’s actions, but it’s evidently enough to influence Federal Reserve Chair Jerome Powell’s statements, giving him more reason to maintain a hawkish stance in both his statements and the subsequent Q&A.

How Is the Rate Change Affecting the Crypto Market?

If the Fed will make a surprise rate hike announcement this week, the TV personality predicts there may be “turbulence” in the markets.

“The bottom line is, when there’s a Fed meeting coming up in less than a week, and nobody seems worried about it, maybe you want to brace yourself for a little turbulence.”

In his recent, speech, Fed’s Chair has stated that although the American economy has grown more resilient, inflation is still “too high.” He stated that the central bank will “proceed carefully” before making any decisions, but it might still hike interest rates if necessary.

Despite the Fed’s eleven interest rate hikes during this tightening cycle, the market clearly grasped the central bank’s resolute commitment to adjust monetary policy. Cryptocurrencies and high-risk equities hit their peak in November 2021.

As interest rates climbed, two other significant asset classes responded differently. While cryptocurrencies and other risky assets declined, commodities like oil surged at the start of 2022. However, these moves were short-lived. Both oil and cryptocurrency have stabilized, as expectations suggest a potential decline or halt in rate hikes in 2023.

Crypto As a Panacea?

People have often touted cryptocurrency as a cure-all for various economic challenges such as deflation, inflation, low interest rates, and purchasing power shortages. As long as cryptocurrency prices surged, regardless of other assets, these benefits seemed undeniable.

Like other high-risk assets, cryptocurrencies declined when the Fed announced rate hikes in November 2021 and continued their decline throughout 2022. Certain cryptocurrency collapses and exchange issues, such as FTX, further undermined trader confidence. Nevertheless, due to uncertainty in the banking sector, some traders increased their bids for cryptocurrencies, hoping for a less abrupt rate hike trajectory.

Market Outlook

During the Asian trading session on Monday morning, September 18, 2023, cryptocurrency markets traded in a narrow range. As a result, at the time of writing, total capitalization  was $1.1 trillion.

However, since the same time last Monday, the amount has increased by about $50 billion.

At the time of crafting this article, Bitcoin  was trading at $27,402. Ethereum , which has been circling around the $1,666 mark over the weekend, has been quite inactive.

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