Crypto markets are bracing for impact as the Fed’s mixed signals are making it difficult to navigate the rate cut trajectory. Fed chair Jerome Powell in a testimony predicted that rate cuts would happen this year however, reiterated that the Fed would gauge the inflation rate before finally deciding to cut rates. With the looming uncertainties, the upcoming job data on Friday will serve as a key indicator of accessing the Fed’s upcoming trajectory.

Fed Inflation Discourse Still Same

Reuters reports that Federal Reserve Chair Jerome Powell stated on Wednesday that the U.S. economy does not appear to be close to entering a recession, but he did point out that it is still unknown when the central bank may lower interest rates and support the present growth because more progress on inflation is not certain. Powell told members of the House Financial Services Committee during his appearance before lawmakers who will be facing voters tired of inflation this autumn that “there is no evidence, there is no reason to think, that the U.S. economy is in or in some kind of short-term risk of, falling into recession.”

Reuters further highlighted that Powell acknowledged that there was a chance the Fed would wait too long to ease monetary policy and harm the economy, but he also cautioned against committing to any timeline for rate cuts as we approach a contentious presidential election year. Powell also noted that the Fed did not want to loosen credit conditions too soon and watch inflation get to the accepted level. The sentiment could be a little concerning for the crypto community.

Fed’s Commentary in line with Minutes of Meeting

Powell’s speech didn’t highlight something new that the Fed hadn’t released in its minutes of the meeting. The Federal Reserve was cautiously optimistic about inflation and said they were not in a rush to decrease interest rates, according to minutes from their last meeting. The commentary came after officials decided to keep the benchmark overnight borrowing rate at its current level. They also changed the statement they released following the meeting to clarify that no rate reduction would take place until the interest rate-setting Federal Open Market Committee (FOMC) felt “greater confidence” that inflation was decreasing.

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Will Crypto Markets Face Buying Pressure?

All hope for the Fed’s next meetings has been dashed by the decision to postpone rate decreases. Markets are pricing in a 95% possibility that the Fed won’t cut interest rates at its upcoming meeting in March, according to the CME FedWatch Tool. The commentary and move have dented market sentiments as, since last December, there had been considerable optimism that rate decreases would occur as early as March. But, it will be crucial to understand the Fed’s potential perspective on the economy at its meeting in March.

Investors have historically relied heavily on the Federal Reserve’s rate choices as a guide for evaluating assets. Lower interest rates frequently devalue government securities, which increases the attraction of assets like cryptocurrency. The probability that investors might stick with traditional assets for a while in light of the Fed’s decision to delay rate lowering has caused the cryptocurrency markets to brace for volatility.

Positively, though, a robust economy also keeps investor demand high. Purchasing power is usually constant in positive economies, and riskier investments are preferred. In such a case, crypto markets are likely to continue rising at the current rate, regardless of the Fed’s decision.

The post US Fed Rate Cuts: Crypto Markets Gauge Uncertainty With Mixed Signals appeared first on CoinGape.

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Filed under: News - @ January 1, 1970 12:00 am