Fed Rate Cut Delay Sparks Crypto Volatility Concerns Despite Halving

full version at coingape

The speculation around Fed rate cuts is keeping markets on their toes. At present, the trajectory seems a bit confusing with no clear signal of when the first rate cut might happen. In the middle of all the speculations, president of the Federal Reserve Bank of Atlanta Raphael Bostic stated that he is satisfied with maintaining current interest rates and reiterated that he believes lowering borrowing costs won’t be acceptable until close to the end of the year.

According to The Business Times, Bostic stated that although he still thinks inflation will reach the central bank’s target of two percent, the process is probably going to take longer than most people anticipate. The head of the Atlanta Fed has already stated that he expects this year to see just one rate drop.

Data Points to Delay in Fed Rate Cut

Bostic’s view on the Fed rate cut goes in tandem with economic data points in the US. With 303K new employment added in March 2024—the biggest in ten months—the US economy outperformed market estimates of 200K and a downwardly revised 270K in February. This suggests that the economy remains robust. The unemployment rate dropped from 3.9% to 3.8%, which was also below market estimates. This points to the US labor market’s continued strength, which allows the Fed to justify rate decreases and buy them more time.

Jerome Powell, the chairman of the Federal Reserve, has previously voiced skepticism on the likelihood of a recession in the US economy. He acknowledged, though, that it is difficult to predict when interest rates may be lowered by the central bank. Due to the uncertainty surrounding potential future inflationary events, the Fed currently supports the state of the economy as it stands.

Fed Rate Cut to Give Crypto Markets a Boost

Since December 2023, the market has priced around three rate decreases for 2024; the first-rate decrease was anticipated at the March meeting. However, economic facts and consistent signals from Fed leaders severely reduced expectations of the same. The bitcoin markets could be impacted by this.

In the past, while assessing assets, investors have placed a great deal of weight on the Federal Reserve’s rate decisions. Government securities usually lose value when interest rates are lowered, which makes bitcoin and other virtual assets more appealing.

The market instability for cryptocurrencies has been brought on by the Fed’s decision to postpone rate reduction, which may lead investors to decide to temporarily hold onto traditional assets. Better yet, strong demand for investments is maintained by a strong economy.

In prosperous economies, riskier ventures are favored. Given the current situation, it doesn’t appear likely that the Fed’s decision will slow the rate at which the cryptocurrency market is expanding.

The post Fed Rate Cut Delay Sparks Crypto Volatility Concerns Despite Halving appeared first on CoinGape.