Cryptocurrency markets were under close watch as the Federal Reserve decided to keep interest rates unchanged at its March meeting. But she pointed to three interest rate cuts to achieve this. However, according to Bloomberg, Atlanta Fed President Rafael Bostic says he now sees plans to cut interest rates only once this year, and that rate drop will likely happen later than he expected.
The Fed has offered three previous interest rate cuts
The change in expectations regarding the path of interest rate cuts by the Fed comes at a time when the market was already optimistic about upcoming interest rate cuts. The market had priced in about three 2024 rate cuts since December 2023, with a first-order cut expected at the March meeting. However, the expectations themselves have been significantly dampened by repeated indicators from economic statistics and Federal Reserve officials themselves. Likewise, the interest rate cut that was expected in June has now been postponed further until September or later. This may put some pressure on the cryptocurrency markets.
Jerome Powell, Chairman of the Federal Reserve, has said in the past that he does not believe a recession is imminent in the US economy. However, he noted that there is uncertainty surrounding future inflationary progress, making it difficult to predict when the central bank will cut interest rates and boost current growth.
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Why is this important for cryptocurrency markets?
Investors have historically relied heavily on the Fed's interest rate choices when valuing assets. Low interest rates often cause government securities to lose value, which increases the appeal of Bitcoin and other crypto assets. Investors may decide to stick with traditional assets for the time being as a result of the Federal Reserve's delay in interest rate cuts, causing cryptocurrency markets to expect volatility. But on the positive side, the strong economy is also keeping investor demand at high levels. In prosperous economies, purchasing power is usually stable, and riskier investments are favoured. The Fed's decision is unlikely to stop the current growth rate of cryptocurrency markets in such a situation.
