Global market conditions also affect cryptocurrencies, making the Fed’s interest rate strategy one of the most important topics this year. The increase in 2022 continued last year but has now stopped. After the announcement of the cap interest rate, the market once again became extremely optimistic. Will the Fed cut this? How will virtual currencies be affected in this case?
Fed Interest Rate Cut
Gold, silver, dollar, stocks, and ultimately cryptocurrency markets are greatly affected by the Fed’s interest rate policy. This is normal, as the increase in the value of the dollar pushes investors into riskier investments. This has reduced demand in the high-risk crypto market.
Investors, who previously relied on 2024, now expect the Fed to make a significant interest rate cut this year. Although Powell and his team’s forecast was 75bp, the forecasts were revised upwards to a 160bp reduction following today’s PPI data.
What stands out will be the message given at the Fed meeting at the end of January. Employment numbers are strong but I know members are expecting a slowdown here. Inflation did not rise as quickly as expected. But Powell’s message is extremely important
IMF and Wells Fargo Forecasts
Latest data shows that the Fed’s early interest rate hikes are starting to bear fruit as expected. Despite some short-term deviations, inflation is on a downward trend
The only problem is that most Fed officials say they shouldn’t cut interest rates too quickly. Wells Fargo’s CEO thinks the ongoing uncertainty should now translate into a timetable, albeit a broad one;
“There is significant uncertainty about the timing and scope of the Fed’s interest rate steps.”
IMF spokesman Kozak is also among those optimistic about a soft landing.
“The IMF’s general view is that the global economy is poised for a soft landing with low inflation, but low-income countries risk falling further behind.”
While short-term interest rate futures contracts in the USA rose after the PPI data, investors increased their expectations for a Fed interest rate cut. Investors’ expectations that the Fed will expand in 2024 increased from 154 basis points to 160 basis points.
