Speculation about the Fed's interest rate cuts has put markets on alert. At the moment, the trajectory appears to be a bit confusing, with no clear indication as to when the first rate cut will occur. Amid all the speculation, Atlanta Fed President Rafael Bostic said he was satisfied with current interest rates and reiterated his belief that lower borrowing costs won't be accepted until near the end of the year.
Bostic said he still believed inflation would reach the central bank's 2% target, but that the process would probably take longer than most expected, according to the Business Times. The Atlanta Fed president has already said he expects to cut interest rates only once this year.
Data points delayed by Fed rate cut
Bostic's views on the Fed's interest rate cuts are consistent with U.S. economic data. The number of new jobs in March 2024 was 303,000, the highest in 10 months, and the U.S. economy exceeded market expectations of 200,000 and 270,000, which was revised downward in February. This suggests that the economy remains strong. The unemployment rate fell from 3.9% to 3.8%, which was also lower than market expectations. This shows that the U.S. labor market remains strong, allowing the Fed to justify lowering rates and buy more time.
Federal Reserve Chairman Jerome Powell has previously expressed skepticism that the U.S. economy could slip into recession. However, he acknowledged that it is difficult to predict when the central bank will cut interest rates. Due to the uncertainty surrounding potential future inflation events, the Fed is currently supporting the economic status quo.
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Fed cuts interest rates to stimulate crypto market
Since December 2023, the market has priced in about three rate cuts in 2024. The first ever decline was expected at the March meeting. However, economic facts and consistent signals from Fed leaders have significantly lowered similar expectations. The Bitcoin market may be affected by this.
Historically, investors have placed great weight on the Federal Reserve's interest rate decisions when evaluating assets. Government bonds typically decrease in value when interest rates are lowered, making Bitcoin and other crypto assets more attractive.
The volatility in the crypto market has been brought about by the Federal Reserve's decision to postpone interest rate cuts, and investors may decide to temporarily hold on to traditional assets. Even better, strong investment demand is sustained by a strong economy.
Prosperous economies favor riskier adventures. Given the current situation, it seems unlikely that the Fed’s decision will slow the rate of expansion of the crypto market.
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