Rates, inflation, and data — the forces behind every price.
What you will learn
Understand how central bank policy moves markets
Read key economic indicators
See the rate-inflation-growth feedback loop
Rates and the curve
Rates and the curve
Inflation and policy
Inflation and policy
The central bank's mandate
Most central banks target price stability (low inflation) and often full employment. They move a short-term policy rate to cool or stimulate the economy. Everything in markets — bonds, stocks, crypto — reprices off expectations of where that rate goes.
💡 How a rate hike ripples
A rate hike makes borrowing costlier → companies invest less → growth slows → stocks de-rate (future earnings worth less) → the dollar strengthens → gold and crypto often fall. One decision, a thousand repricings. This is why markets hang on every Fed word.
Key indicators
CPI/PPI (inflation), nonfarm payrolls (jobs), GDP (growth), PMI (manufacturing/services health), retail sales (consumer), initial jobless claims (labor). These data points are the 'news' that actually moves markets — not headlines.
The feedback loop
Strong growth → rising inflation → central bank hikes → growth cools → inflation falls → central bank pauses/cuts → growth resumes. Understanding where we are in this cycle is the essence of macro investing. Markets price the next move, not the current data.
💡 Markets are forward-looking
By the time a strong jobs report prints, the market has often already priced the rate hike it implies. The trade is on the surprise (vs. expectations) and the trajectory, not the number itself. 'Buy the rumor, sell the news' is this dynamic in action.
Why this matters for you
Even if you're a technical trader or crypto holder, macro is the tide that lifts or sinks all boats. Liquidity cycles drive risk appetite across every asset. Ignore macro and you're trading with one eye closed.
❓ Quick check
Markets typically price in:
A) Past data
B) Expectations of the future
C) Only today's print
D) Nothing
Markets are forward-looking.
(Knowledge check — full exam is next)
Key takeaways
Central banks set the price of money; everything reprices off it