NEW DELHI (CoinChapter.com) — Global delivery giant FedEx Corp. announced its plans to raise shipping rates by an average of 6.9% across most of its services. The raise would occur in Jan next year.
The rate increase comes from the firm slashing its annual profit and sales forecasts. The number of packages that FedEx handled daily dropped 11% yearly, making it the third quarter of decline this year.
Furthermore, FedEx and its fellow carriers saw a decline in the cargo volumes they handled as inflation led to a decline in consumer demands. Fee increases helped boost FedEx’s revenue despite the volume squeeze, but operating expenses ate at the company’s profit margins.
Interestingly, FedEx hiking its rates might negatively impact Bitcoin (BTC) prices and the prices of other cryptocurrencies.
Fed Rate Hikes And Crypto Prices
The US Federal Reserve has been hiking an interest rate spree to combat growing inflation. During its most recent meeting, the Fed raised its fund rates by 75 bps to the 3%-3.25% range. The third three-quarter point increase was the hike that pushed borrowing costs to the highest since 2008.
Federal Reserve rates over the past ten years. Source: Trading Economics
An increase in federal fund rates would decrease the amount of money in the market. Furthermore, investors would likely avoid risky assets like equities and cryptocurrencies and look to “haven” options like the US dollar.
Moreover, the rising dollar would likely look more attractive to investors, given Bitcoin and the crypto market’s general volatility. At present, the federal fund rates are at the highest they have been in the last ten years.
With FedEx raising its shipping rates and the escalating tensions in Eastern Europe, the chances of inflation going down look slim. Here’s why
The War Tensions In Europe And Inflation
So, how does FedEx raising its shipping rates impact the Federal Reserve’s hawkish stance on inflation? With Russian president Vladimir Putin “partially” mobilizing the country’s military reserves, tensions in the region have escalated.
Despite several battlefield setbacks, Putin seems hellbent on annexing Ukraine or the territories it has captured in east Ukraine. The Russian president reiterated his threats to use nuclear weapons to defend what Russia considers its turf.
As a result of the Russia-Ukraine conflict, Èurope is facing an unprecedented energy crisis. Russia has significantly reduced its natural gas supply to Europe after the western powers imposed sanctions on the Kremlin.
Supply of gas supply from Nord Stream 1 has declined. Source: Nord Stream AG
Supplies via Nord Stream 1, a pipeline that links Russia to Germany, were reduced to 20% from 40%, with the operator citing maintenance issues. The resulting energy crisis has impacted inflation across the entire European region.
Most of western Europe had inflation under control till 2020. The rates started rising during the pandemic, but it was only in 2022 that central banks in the region began losing control. Inflation is soaring to multi-year highs nearly everywhere in the region.
Inflation across Europe rose drastically after the Russia-Ukraine conflict. Source: Intellinews
Food prices are soaring due to the Russia-Ukraine tensions and the sanctions against the Kremlin. Ukraine is the world’s largest producer of sunflower oil. Russia and Ukraine are responsible for over a third of the world’s wheat production.
Wheat prices were up more than 21% in August, with many other food items like potatoes and corn prices remaining elevated. However, prices of items like meat, poultry, and fish are back to normal.
Power is one of the biggest contributors to inflation, along with food. Though food item prices are normalizing, power prices remain up ten-fold from the five-year average. Moreover, with gas disruption likely to continue, the chances of power prices falling are nearly infinitesimal.
FedEx Rate Hike And Inflation
Sanctions against Russia and tensions in eastern Europe have disturbed supply lines globally. As a result, a hike in FedEx’s shipping rates would impact commodity prices everywhere, lending fuel to already inflamed inflation rates.
FedEx has more than a third market share in the global shipping business. Source: CSIMarket
The company has the highest market share of 36.39% in the global shipping business. A spike in prices globally would make it difficult to contain inflation, giving the Federal Reserve a reason to continue being hawkish.
Furthermore, the World Bank has issued a warning of the rising risks of a global recession in 2023. Coupled with the hike in commodity prices likely due to the FedEx price spike, cryptocurrencies will find it difficult to break out of the ongoing bearish market conditions.
Is the financial outlook grim all around? Here’s something that would raise the spirits amid the market plunge.
A Delhi-based Markets writer, I did my bachelor's in engineering with major in electronics and communications. I first heard of bitcoin while writing an article about blockchain technology a few years back, and have been following it ever since. Bitcoin may well be current big thing happening in the finance industry, and it feels like the right time to join the crypto bandwagon.
