The US Federal Reserve (Fed) made its interest rate decision and monetary policy statement yesterday. Investors wondered what impact this announcement would have on cryptocurrency markets. The Fed’s interest rate hike and concerns about inflation may cause a decline in cryptocurrency prices. However, optimistic statements that the economy will improve may be a positive development for the cryptocurrency markets. Here are the details…
FED President shared his economic comments
US Federal Reserve (Fed) Chairman Jerome Powell made important statements about the current state of the economy and the Fed’s monetary policy in an interview with Marketplace host Kai Ryssdal. Powell emphasized that concerns about a recession in the US are unfounded and there is no need to rush to cut interest rates.
Personal Consumption Expenditures (PCE) data encouraged Powell. Powell said the initial reading on the PCE was in line with expectations, which was encouraging. He added that February data was in the direction the Fed wanted to see. A stable approach to combating inflation. Powell said more good data similar to last year is needed to gain confidence in inflation. He stated that the Fed’s approach is stable and they are making progress.
There is no urgency for a rate cut
Powell also said they did not overreact to last year’s good data. He also announced that they would not overreact to this year’s two high moons. Moreover, there is no rush for interest rate cuts. Powell warned that cutting rates too soon could be devastating, and waiting too long could harm the economy and labor market. He emphasized that the economy is poised to perform in unexpected ways and the risks are two-sided.
Powell said monetary policy is well positioned to react to different data and there is no need to rush to cut rates. He added that making the right decision is a top priority. The Fed could cut interest rates three times in 2024. Powell and other Fed officials foresee cutting interest rates by 75 basis points to 4.6% by the end of 2024. This is part of its efforts to reduce inflation to the targeted 2%.
What does it mean for cryptocurrencies?
So, what do Powell’s statements mean for Bitcoin and other cryptocurrencies? The Fed’s delay in cutting interest rates could cause investors to turn to traditional assets, especially cryptocurrencies, whose appeal has increased with the launch of the spot Bitcoin ETF. Low interest rates will normally reduce the value of government bonds, including some traditional asset classes. As a result, this is driving the appeal of assets such as cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH) and other altcoins.
According to experts, investors are likely to choose to stick with these traditional assets as the Fed decides to postpone its decision to cut interest rates. Especially since the spot Bitcoin ETF is pushing demand and market valuations to new heights.
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