Only one interest rate cut this year? Powell is being hawkish again, and BTC is giving back gains

Original author: Mary Liu, BitpushNews

During the early trading session on Wednesday, the Consumer Price Index (CPI) for May, announced by the US Department of Labor, was lower than expected. The cryptocurrency market surged, and the price of Bitcoin rebounded to over $70,000. However, the momentum quickly reversed after the Federal Reserve kept interest rates unchanged and indicated that there may only be one rate cut this year. At the time of writing, the trading price of Bitcoin is $68,250, with a 24-hour increase of 1.5%.

Altcoins are performing well, with most of the tokens in the top 200 by market capitalization seeing price pumps.

DePIN, the newer token on Io.net (IO), performed the best with a 35% increase, followed by Livepeer (LPT) with a 19.3% pump, and Injective (INJ) with a 12.6% increase. Akash Network (AKT) had the largest drop, decreasing 10.5%, FLOKI (FLOKI) decreased 7.9%, and MANTRA (OM) decreased 5.3%.

The total market capitalization of cryptocurrencies is 2.48 trillion US dollars, with Bitcoin’s market share at 54.1%.

The US stock market ignored Powell’s remarks. As of Wednesday’s close, the Dow Jones initially fell by 30 points or 0.09%, the S&P 500 rose by 0.85%, and the Nasdaq rose by 1.53%. The latter two set new closing highs for three consecutive trading days. Nvidia (NVDA.O) rose 3.5%, and Apple (AAPL.O) rose 2.86%. At one point during the session, it regained its position as the world’s largest market capitalization.

Only one interest rate cut this year? Powell’s speech leans towards ‘hawkish’

The Fed today kept interest rates at the current range of 5.25% to 5.5%, but lowered its rate-cut expectations to only one in 2024. Policymakers noted that the 2% inflation target has made “further progress”.

However, Federal Reserve Chairman Jerome Powell said at a press conference that although inflation has fallen from its peak, there is currently no confidence in cutting interest rates, let alone announcing a date for rate cuts.

Powell said, “We believe today’s (CPI) report has made progress and enhanced confidence. But we believe we do not yet have enough confidence to start easing policy.”

Powell also believes that the Fed’s restrictive stance on monetary policy is having the expected effect on inflation, but he added that central bank officials are still waiting to see sufficient progress.

Powell said, “Over time, we’ll know whether it has enough restrictiveness. But I think, for the reasons I mentioned at the last press conference and elsewhere, the evidence is very clear that the policy is restrictive and is having the desired effect.”

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

Some analysts say that considering the mild CPI, the Fed’s forecast today looks a bit outdated, but this may also reflect its reluctance to change the forecast based on one set of data. Powell also said in his speech that the inflation outlook provided by the Fed is “a fairly conservative forecast” that may not be confirmed by future data and may be revised.

Analyst: Bitcoin may consolidate or mildly rise around current levels

Bitfinex analysts said the decision to maintain the stability of interest rates indicates that the Fed remains cautious about inflation, as the Fed needs to balance inflation control with economic stability.

Analysts point out: “Historically, decisions to cut interest rates or maintain interest rates unchanged have had a significant impact on asset flows and market prices. For example, past rate cuts have typically led to asset price increases and ETF inflows, similar to the situation in the gold market. The cryptocurrency market may also experience similar situations. The last eight CPI and FOMC events have led to increased volatility, at least on an intraday or weekly basis. However, since March, this increased volatility has been short-lived.”

Despite the Fed’s decision to maintain interest rate stability, the global trend is towards rate cuts, and it’s only a matter of time before the Fed follows suit.

Analysts wrote:“Central banks around the world have started cutting interest rates, indicating an expanding trend of monetary easing. It is evident that the Bank of England and the Federal Reserve will follow suit in the coming months. The global liquidity cycle suggests that money supply may increase, which can support asset prices, including cryptocurrencies.”

The volatility of the cryptocurrency market may increase in the short term. Analysts say, ‘With the Federal Reserve’s decision to maintain the current interest rate, Bitcoin (BTC) may experience short-term fluctuations as the market adjusts based on the news. However, the overall trend may remain positive, especially if the overall economic outlook continues to improve.’

They pointed out, “Historically, three out of the past four CPI data announcements have also led to localized highs in bitcoin prices, indicating that such announcements may bring about fluctuations. Due to investors’ optimistic outlook on later rate cuts this year, bitcoin may consolidate or experience moderate pumps near its current levels.”

Ionic Digital CEO Matt Prusak stated:“As the Federal Reserve attempts a soft landing, any substantial drop in Bitcoin could present attractive accumulation opportunities for long-term investors.”