Fed Unlikely to Introduce Rate Cut Before September: Analysts
The US Personal Consumption Expenditure (PCE) report, which is the Federal Reserve’s preferred gauge of inflation, is set to be released on March 1. However, the crypto market has already experienced a setback due to a delay in anticipated rate cuts by the Federal Reserve. Analysts, including Jim Bianco from Bianco Research, believe that the Fed is unlikely to introduce rate cuts before September this year. Here’s why:
Probabilities of Rate Cuts are Decreasing
According to Jim Bianco, the probabilities of a Federal Reserve rate cut are decreasing leading up to the next four Federal Open Market Committee (FOMC) meetings. The chances of rate cuts in the March and May meetings are almost non-existent. Attention now turns to the June and July meetings. However, if February’s payroll and Consumer Price Index (CPI) data continue to show strength, expectations for rate cuts in these months may diminish.
Fed Faces Political Scrutiny
The Fed faces a delicate balancing act amid political scrutiny. The September 18 meeting precedes the election, while the November 7 meeting occurs the day after. This situation suggests that the Fed is unlikely to introduce rate cuts before September. Announcing a rate cut just six weeks prior to the elections could be seen as a political move, contradicting the Fed’s claims of not being involved in politics.
PCE Data Report Expected to Inject Volatility into Market
This week, traders on Wall Street are anticipating the release of the core PCE data report, which is expected to inject volatility into the market. Traders are advised to brace themselves for possible turbulent price movements and remain agile in responding to sudden shifts in market dynamics.
Forecasts for January’s Core PCE
Forecasts suggest that January’s core PCE could show a 0.4% increase compared to the previous month. This uptick may result in a slight decrease in the annual figure from 2.9% to 2.7%, indicating a modest but encouraging shift in direction. However, traders are cautioned against complacency, as the official results could still bring surprises, similar to recent CPI and Producer Price Index (PPI) surveys.
FOMC Officials Announce Delay in Interest Cuts
Despite stronger-than-expected inflation and labor market performance in January, New York Federal Reserve President John Williams maintains his belief that the US central bank is still likely to reduce interest rates “later this year.” In an interview with Axios, Williams explained that his overall perspective on the economy remains unchanged, stating that one month of data does not significantly impact his view.
Cautious Approach to Rate Cuts
Williams, along with other Fed policymakers, has expressed a cautious approach to rate cuts. He believes that more confidence in inflation’s downward trend is needed before initiating such measures. Williams emphasized the importance of assessing various indicators collectively and looking for consistent signs that inflation is moving towards the Fed’s long-term goal of 2%.
Comprehensive Analysis Required
Williams highlighted the need for a comprehensive analysis that takes into account labor market dynamics and other indicators when determining the appropriate course of action. While significant changes in the economic outlook could prompt reassessment, Williams stated that rate hikes are not his primary expectation.
Hot Take: Brace Yourself for Volatility Ahead
The upcoming release of the PCE data report and the delay in anticipated rate cuts by the Federal Reserve have created a sense of uncertainty in the crypto market. As a crypto enthusiast, you should brace yourself for potential volatility ahead. Here are a few key takeaways:
- The Fed is unlikely to introduce rate cuts before September, according to analysts.
- Probabilities of rate cuts are decreasing leading up to the next four FOMC meetings.
- The Fed faces political scrutiny, making it less likely to make rate cuts before the election.
- Traders should prepare for possible turbulent price movements and remain agile in responding to sudden shifts in market dynamics.
- Forecasts suggest a modest uptick in January’s core PCE, but caution is advised as official results could bring surprises.
- Fed officials, including John Williams, maintain a cautious approach to rate cuts and emphasize the need for comprehensive analysis.
With these insights in mind, you can navigate the current market conditions with greater awareness and make informed decisions as a crypto investor.
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