Only one rate cut this year? Powell is hawkish again, BTC gives up gains

Original author: Mary Liu, BitpushNews

Crypto markets surged in early trading on Wednesday after the Labor Department reported lower-than-expected consumer price index (CPI) data for May, with Bitcoin rebounding to over $70,000, but gains quickly fell after the Federal Reserve kept interest rates unchanged and hinted that it might only cut once this year. At press time, Bitcoin was trading at $68,250, up 1.5% in the past 24 hours.

Altcoins performed positively, with most of the top 200 tokens by market cap seeing price increases.

Newer DePIN token Io.net (IO) was the best performer, up 35%, followed by Livepeer (LPT), up 19.3%, and Injective (INJ), up 12.6%. Akash Network (AKT) was the biggest loser, down 10.5%, while FLOKI (FLOKI) fell 7.9% and MANTRA (OM) fell 5.3%.

The current overall market value of cryptocurrencies is 2.48 trillion US dollars, and Bitcoins market share is 54.1%.

The U.S. stock market ignored Powells remarks. As of the close of Wednesday, the Dow Jones Industrial Average initially closed down 30 points or 0.09%, the SP 500 rose 0.85%, and the Nasdaq rose 1.53%. The latter two hit new closing highs for three consecutive trading days. Nvidia (NVDA.O) closed up 3.5%, and Apple (AAPL.O) rose 2.86%, regaining the title of the worlds largest market value during the session.

Only one rate cut this year? Powells speech is hawkish

The Federal Reserve today kept interest rates in their current range of 5.25% to 5.5%, but lowered its expectations for rate cuts to just one in 2024. Policymakers noted that further progress had been made toward the 2% inflation target.

However, Federal Reserve Chairman Jerome Powell pointed out at a press conference that although inflation has fallen from its peak level, there is no confidence in cutting interest rates yet, let alone the stage of announcing a date for a rate cut.

We think todays (CPI) report was progress and confidence-building, Powell said. But we dont think we have enough confidence yet to start easing policy.

Powell also argued that the Feds restrictive stance on monetary policy is having the desired effect on inflation, but added that central bank officials are still waiting to see enough progress.

“Whether it’s been restrictive enough, we’ll know over time,” Powell said. “But I think, for the reasons I talked about in my last press conference and elsewhere, I think the evidence is very clear that policy has been restrictive and it’s having the effect that we hoped it would.”

In addition, most Fed officials are not in a hurry to cut interest rates. Laurence Meyer, a former Fed official, said: The CPI data is good, and I think the Fed may cut interest rates in September. Because before the mid-September meeting, they will have three monthly economic reports.

Some analysts said that given the mild CPI, the Feds forecast today looks a bit outdated, but it may also reflect its reluctance to change its forecast based on one piece of data. Powell also said in his speech that the inflation outlook provided by the Fed is a fairly conservative forecast and may not be confirmed by future data and may be revised.

Analyst: Bitcoin may consolidate around current levels or rise modestly

Bitfinex analysts said the decision to keep interest rates stable shows that the Fed remains cautious about inflation as it needs to balance inflation control with economic stability.

The analysts noted: “Historically, both rate cuts and decisions to keep rates unchanged have had a significant impact on asset flows and market prices. For example, past rate cut decisions have typically led to higher asset prices and ETF inflows, as has been the case in the gold market. A similar dynamic will play out in the cryptocurrency market. The last eight CPI and FOMC events have all led to increased volatility, at least on an intraday or intraweek basis. However, since March, this increased volatility has been short-lived.”

Although the Fed decided to keep interest rates stable, the global trend is to cut interest rates, and it is only a matter of time before the US central bank cuts interest rates.

“Central banks around the world have already started cutting interest rates, suggesting that the trend toward monetary easing is expanding. It is clear that the Bank of England and the Federal Reserve will follow suit in the coming months. The global liquidity cycle suggests that money supply is likely to increase, which can support asset prices, including cryptocurrencies,” the analysts wrote.

Volatility in the crypto market may increase in the short term. Analysts said: Since the Federal Reserve has decided to maintain current interest rates, Bitcoin (BTC) may experience short-term volatility as the market adjusts to the news. However, the overall trend is likely to remain positive, especially if the overall economic outlook continues to improve.

“Historically, three of the past four CPI releases have also led to local highs in Bitcoin prices, suggesting that such announcements may bring volatility,” they noted. “As investors remain optimistic about rate cuts later this year, Bitcoin may consolidate around current levels or see modest gains.”

“As the Fed attempts to achieve a soft landing, any material decline in Bitcoin could present an attractive accumulation opportunity for long-term investors,” said Matt Prusak, CEO of Ionic Digital.

This article is sourced from the internet: Only one rate cut this year? Powell is hawkish again, BTC gives up gains

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