The Fed Is Not Thinking About A Rate Cut This Year Yet – What Does This Mean For Crypto?
Federal Reserve Governor Michelle W. Bowman recently announced that it is too early to consider cutting interest rates in 2024.
This statement comes at a time of heightened sensitivity in both traditional and crypto markets. The situation is further strengthened by the expectation of the release of key economic data later this week.
In his statement, Bowman stressed that despite modest progress in managing US inflation, it remains elevated and faces various risks. This position is consistent with the Federal Reserve's cautious approach to monetary policy in an uncertain economic environment. She also stressed the importance of the Federal Reserve maintaining its independence and apolitical stance in its decision-making processes.
These remarks precede the second revision of US GDP data for the first quarter, which will be released on Thursday, June 27. US consumer spending (PCE) data is expected on Friday.
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Nvidia continues with losses - AI tokens are in profitBowman noted: “However, with average core consumer price inflation this year to May at 3.8%, I expect inflation to remain high for some time.” She also suggested a potential departure from global monetary policy trends.
Bear trend in the crypto market
Federal Reserve monetary policy is putting pressure on market conditions, including cryptocurrencies. Higher interest rates typically strengthen the US dollar, which can act to lower asset prices, including cryptocurrencies. Conversely, lower interest rates typically encourage asset prices to rise as investors seek higher returns in riskier markets.
Bowman's assertion that a rate cut is unlikely until 2025 suggests that borrowing costs will remain relatively high, potentially hindering investment flows into the crypto market. This scenario could intensify the recent crypto crash, as investors may prefer safer and more profitable assets to volatile cryptocurrencies.
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Fears of recession in the US amid massive corporate bankruptciesThe crypto market has been turbulent lately, a. Bitcoin (BTC) it recently fell below $59,000 amid significant selling. Among the factors that contributed to this are recent ones BTC sales by the German government and expected payment to investors worth $9 billion from Mt. Gox, which further soured market sentiment.
However, the lack of an expected rate cut fueled fears of prolonged market turmoil. As traditional financial conditions tighten, the appetite for riskier assets such as cryptocurrencies often diminishes.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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