Markets
Crypto Volatility Rises With Upcoming US Inflation Data
The crypto market has been experiencing significant changes volatility as the US Federal Reserve prepares to release updated economic projections this week.
Despite slower growth, market watchers and investors expect these projections to show fewer interest rate cuts.
JPMorgan and Citi abandon July rate cut forecasts
Fed Chairman Jerome Powell warned that actual results may vary. Unexpected economic conditions defied the Fed’s recent forecasts.
While key inflation While measures have remained stable following aggressive rate hikes in 2022 and 2023, economic risks are now more nuanced, with often contradictory data. For example, US companies added 272,000 jobs in May and wages increased at an annual rate of 4.1%. However, the unemployment rate rose to 4%.
See more information: How to protect yourself from inflation using cryptocurrency
“In recent months, there has been no further progress toward the Committee’s 2% inflation objective,” the Fed said he wrote after their last meeting on May 1.
Consequently, the Fed is cautious about rate cuts until inflation improves significantly. Policymakers question whether inflation can reach the 2% target without a restrictive monetary policy. The Fed’s approach to rate cuts contrasts with that of some global counterparts, such as the European Central Bank (ECB) and the Bank of Canada (BoC). who recently reduced rates. According to Wall Street Journal reporter Nick Timiraos, JPMorgan and Citigroup have dropped their forecasts for a rate cut in July after last Friday’s employment report.
“Most sell-side economists and other professional Fed watchers now anticipate one or two rate cuts this year, in September or December,” he said. added.
In addition to JPMorgan and Citigroup, several financial institutions have projected their expectations for Fed interest rate cuts in 2024. Most projections indicate that a first rate cut will occur as early as September, while some expect it until December.
The Fed’s interest rate reduction expectations from various financial institutions. Source: X/Nick Timiraos
Matteo Greco, research analyst at Fineqia, shared his perspective on the current situation with BeInCrypto. He explained that less restrictive monetary policies are generally favorable for risky assets such as stocks and cryptocurrencies. This is especially relevant when rate cuts do not foreshadow an imminent recession.
“In this case, the central bank’s decision to cut rates despite inflation exceeding the target suggests optimism about managing inflation and maintaining it close to desired levels, even with more expansionary monetary policies,” he noted.
At the time of writing, Bitcoin (BTC) is trading at $67,482, down 2.8% in the last 24 hours. Meanwhile, major altcoins like Ethereum (ETH) and Solana (SUN) decreased by 3.9% and 3.4% in the same period. The total crypto market capitalization is now $2.59 trillion, representing a 2.7% decrease over the same period.
See more information: 7 Ways to Tackle Retirement as Inflation Rises
Indeed, these developments are crucial for crypto traders and investors. The Fed’s Interest Rate Decisions directly impact market liquidity, borrowing costs and general economic conditions, all of which influence crypto market dynamics.
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