Fed Rate Cut Delay Sparks Crypto Volatility Concerns Despite Halving

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Market anticipation about potential Fed rate reductions remains high, leaving investors in a state of uncertainty. Currently, it’s unclear when the first reduction might occur as the outlook appears murky. Amidst all the conjecture, Raphael Bostic, president of the Federal Reserve Bank of Atlanta, expressed contentment with keeping rates unchanged. He further emphasized that he doesn’t foresee a need to decrease borrowing costs before the end of the year.

The Business Times reports that Bostic expressed his belief that the inflation rate will eventually reach the central bank’s goal of 2%, but it may take more time than most people believe. The president of the Federal Reserve Bank of Atlanta has previously predicted that only one interest rate reduction will occur this year.

Data Points to Delay in Fed Rate Cut

Bostic’s perspective on the Federal Reserve cutting interest rates aligns with positive economic indicators in the United States. In March 2024, an impressive 303,000 jobs were added – the most in ten months – surpassing market expectations of 200,000 and a revised 270,000 from February. This data indicates that the US economy is performing better than anticipated. The unemployment rate also decreased from 3.9% to 3.8%, which was below forecasts, further demonstrating the robustness of the US economy. This economic strength enables the Fed to rationalize rate reductions and buy themselves 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

Starting from December 2023, the market has expected approximately three interest rate reductions in 2024. Initially, a rate decrease was forecasted for the March meeting. However, recent economic data and clear indications from Federal Reserve leaders have lowered these expectations noticeably. This potential shift could influence bitcoin markets.

Previously, investors have given significant consideration to the Federal Reserve’s rate adjustments when evaluating assets. With lower interest rates causing a decrease in the value of government securities, investments like bitcoin and other virtual currencies become more attractive as potential alternatives.

The uncertainty in cryptocurrency markets can be attributed to the Federal Reserve’s decision to delay interest rate cuts. This could cause investors to prefer holding on to conventional assets for now. However, a robust economy keeps investment demand steady.

Wealthy economies tend to encourage riskier business endeavors. At present, it seems uncertain that the Federal Reserve’s move will significantly curb the growing trend of the cryptocurrency market.

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2024-04-19 10:18