The price of a Bitcoin (BTC) is around $62,900 now, which is about 1% lower than before. This decrease occurred following remarks from Federal Reserve Chair Jerome Powell concerning potential future adjustments to interest rates.
At the panel discussion on Tuesday, Federal Reserve Chair Powell emphasized the importance of continuing with a cautious monetary policy based on the slow advance toward the Fed’s 2% inflation goal. As a result, interest rates may need to remain high for an extended period, contrary to expectations held by many investors and financial experts.
SUMMARY OF POWELL’S SPEECH AT THE WASHINGTON FORUM:
1. Powell warned that recent data show lack of further progress on inflation.
2. It will likely take longer than expected to achieve confidence that inflation will return to 2%.
3. Powell is prepared to leave rates at…
— Jesse Cohen (@JesseCohenInv) April 16, 2024
This position emerges after a series of robust economic indicators, including the creation of 303,000 new jobs in March, significantly exceeding expectations, and a 0.7% increase in retail sales instead of the forecasted 0.4%. These figures underscore a vibrant economy.
The Federal Reserve often relies on these indicators to guide its cautious approach to rate reductions, despite calls from various market sectors for faster cuts to boost economic growth.
Market Reactions to Economic Indicators
The robustness of the US economy, marked by a strong labor market and high consumer spending, has fueled market growth. However, these economic signs also pose challenges for the Federal Reserve’s efforts to control inflation, making it harder for them to lower interest rates. The Fed’s stance that rates may stay high to combat persistent inflation has dampened expectations of rate reductions, potentially impacting various investment sectors such as cryptocurrencies and stocks.
Midway through trading, the American stock markets, including the S&P 500 and Nasdaq Composite, experienced mild growth, with increments of approximately 0.1% for both.
Cryptocurrencies, including Bitcoin and Ether, took a hit following Powell’s comments. Historically, Bitcoin’s value is sensitive to changes in interest rates due to its tendency to shift capital into riskier investments. However, the upcoming Bitcoin halving event, which affects supply, has been overshadowed by a pessimistic view of the Fed’s monetary policy.
No Immediate Rate Cuts in Sight
The Fed’s upcoming meeting on April 30 and May 1 suggests that the central bank isn’t planning to lower interest rates anytime soon based on its current stance. Experts have adjusted their forecasts, now projecting that the first rate reduction may not occur until September, while the likelihood of further cuts in 2023 has decreased.
In contrast to the beginning of the year when multiple rate reductions were anticipated based on the economic forecast, this modification represents a significant departure.
In line with this cautious stance, Federal Reserve Vice Chair Philip Jefferson avoided discussing potential rate cuts in his latest remarks, instead emphasizing the preparedness to keep monetary policy tight. The Fed’s persisting view that rate adjustments will be influenced by data continues to shape market forecasts, with a strong emphasis on waiting for more definite evidence of inflation approaching target thresholds before contemplating any easing measures.
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2024-04-17 00:31