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Federal Reserve Chairman Jerome Powell recently made remarks that could have a significant impact on financial markets, including cryptocurrencies.
Chairman Jerome Powell suggested on Thursday that a rate cut may not be far off if the inflation signals align. Chairman Powell reaffirmed this week that officials are still waiting for more evidence that the economy, particularly inflation, is slowing before cutting rates, but there is not much more to do.
Powell said inflation is “not far” from the levels needed for the central bank to start cutting interest rates. “I think we're in the right position,” Powell said of the current policy stance.
The Fed chairman's speech came as financial markets were rising on expectations for Fed policy.
Gold soared to new highs on Wednesday, largely on bets on US monetary easing. Bitcoin reached an all-time high of $69,000 on Tuesday due to inflows into Bitcoin ETFs and an expected halving event.
At the beginning of the year, investors expected the Fed to begin cutting interest rates in March and continue through six or seven cuts this year. The first reduction is scheduled to take place in June, with four cuts totaling 1 percentage point by the end of 2024.
Cryptocurrency and its impact on financial markets
Risk assets such as cryptocurrencies fell in 2022 as central bank interest rate hikes prompted investors to seek higher returns elsewhere.
While the end of interest rate hikes was positive for cryptocurrencies, Fed officials have indicated that interest rates may not come down anytime soon. Chairman Powell said in Congressional testimony this week that inflation is falling, but not enough to prompt the Fed to cut interest rates.
A delay in the Fed's expected rate cuts could derail the positive narrative, as hopes for lower inflation and lower interest rates are fueling a rally in financial markets.
At the time of writing, Bitcoin was trading at $67,552, up 1.16% over the past 24 hours.
