Will Powell’s Fed Actions Boost the Crypto Market This Week?
As the Federal Reserve prepares for its policy announcement this Wednesday at 18:00 GMT, analysts widely anticipate that the central bank will keep its benchmark interest rate steady within the current range of 5.25–5.5%. This move is part of the Fed’s strategy to curb inflation, even if it means tempering economic growth. Officials remain steadfast in their commitment to sustaining high interest rates until they are confident that inflationary pressures have been tamed.
Steady Rates Signal Stability, Raise Questions on Future Cuts
Market expectations suggest minimal chances of significant rate adjustments in the near term. Traders, as reflected in the CME Group’s Fedwatch Tool, indicate a consensus for potential rate cuts not before September. This sentiment has been reinforced by recent data, with traders scaling back their bets for a September rate cut following a robust report from the Bureau of Labor Statistics, indicating stronger-than-expected job market performance in May.
Inflation Trends Influence Rate Projections
Despite initial concerns, recent reports indicate a gradual decline in inflationary pressures, alleviating some fears of an imminent acceleration in price hikes. However, the focus now shifts to the Federal Open Market Committee (FOMC) members’ quarterly economic projections, particularly regarding the trajectory of the fed funds rate. These projections, last updated in March, had suggested a median outlook of three quarter-point rate cuts for 2024. Yet, with inflation persisting and economic growth slower than anticipated, the likelihood of three rate cuts has diminished, making one or two cuts more probable.
Economic Indicators Shape Policy Outlook
The upcoming release of the Consumer Price Index for May is poised to influence the Fed’s projections. Higher-than-expected inflation figures could reignite discussions around potential rate hikes, while softer inflation data might reinforce the possibility of rate cuts. Analysts foresee the Fed revising its outlook towards slower growth and firmer inflation, projecting two rate cuts in the remaining months of the year, with a cutting cycle potentially commencing in September.
Impact on Crypto Market
This week’s economic events include May CPI and PPI inflation data, the Fed’s interest rate decision, and Chair Jerome Powell’s press conference. Higher-than-expected inflation could halt rate cuts. Market volatility may rise, impacting Bitcoin and crypto markets. The Fed is likely to keep rates unchanged, with a 97% probability according to the CME FedWatch Tool.
Powell’s Remarks Hold Key to Market Sentiment
As customary, all eyes will be on Fed Chair Jerome Powell’s post-announcement press conference, where his remarks could provide insights into the central bank’s interest rate stance and shape market expectations. Powell’s comments are expected to offer clarity on the Fed’s perspective, particularly in light of evolving economic conditions and inflationary trends.
