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‘Disinflation’ Trends Will Soon ‘Hit a Brick Wall’: Oanda’s Edward Moya

Christopher Furlong

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How long the labor market’s better-than-expected recovery lasts could have an impact on how quickly inflation falls, Oanda Senior Market Analyst Edward Moya told CoinDesk TV’s “First Mover” Monday.

“These disinflation trends are gonna hit a brick wall pretty soon,” Moya said. “That’s because the labor markets [are] too hot, and that’s really confusing traders.”

Ahead of Federal Reserve Chair Jerome Powell’s speech at the Economic Club of Washington, D.C., Tuesday, Moya said the U.S. economy is “nowhere near getting the job done with inflation.” He noted the current annual inflation rate of 6.5% is far above above the Fed's 2% target. Powell may need to take a more hawkish approach in future, he said.

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“It's still going to be very hard to get to 2% [inflation],” Moya said, adding the inflation situation has placed traders in a tough spot.

“There are a lot of traders that were thinking that they might be done,” Moya said, referring to expectations of what the Fed would do about rate hikes after last week's jobs report. “Now all of a sudden you're looking at the market and now it's leaning towards maybe two more 25 basis point [interest] rate increases.”

“These expectations are widely swinging,” Moya said. He said traders aren’t necessarily being influenced by layoffs in the tech and finance sectors but by the labor market’s projected growth.

Until that weakens, he said, “you’re going to continue to see continued wage pressure, which is going to make the Fed stare at [the] labor market and inflation report and say, ‘Well, maybe we need to continue with this hawkish pushback,’” Moya said.

He said investors should price in at least one to two more interest rate hikes.

“We're probably rangebound for a little bit until we have much clearer clarity, which won't happen for probably a few months,” Moya said, referring to the crypto and equities markets.

Read more: First Mover Asia: Bitcoin Not Ready to Soar as Investors Await Fed Chair Speech, More Earnings