Investors lowered their projections for a rate reduction in September following Federal Reserve Chair Jerome Powell’s ambiguous replies during a press briefing on Wednesday.
A cryptocurrency analyst indicates this may result in a more gradual crypto bull market.
The United States central bank chose to hold interest rates steady at 4.25% to 4.5%, citing uncertainty regarding the economic forecast, which has been described as “remaining significant.”
No determinations regarding September
Powell stated that rising tariffs are beginning to impact consumer prices for certain categories of products. He did not dismiss the possibility of keeping rates unchanged in the upcoming Federal Open Market Committee (FOMC) gathering in September, noting that it will depend on economic indicators over the following two months.
“We have made no determinations about September; we don’t decide that ahead of time,” he remarked.
“If the unemployment rate stays stable and tariffs lead to higher inflation, it will be challenging to justify a rate cut in the coming months,” Bill Adams, chief economist at Comerica Bank, told Reuters.
Powell opposed US President Donald Trump, who has advocated for reduced rates, sticking to his wait-and-watch strategy amidst rising worries that the ongoing trade conflict could hinder achievements towards the central bank’s 2% inflation goal.
The current US inflation rate is at 2.7% and has risen for the past four months.
Rate cut likelihood wanes
Powell’s remarks diminished the chance of a rate cut in September to 40% following the meeting, down from 63% prior to the FOMC announcement.
“Should the Fed continue its prudent approach, the speed of the bull market may decelerate, but the underlying surge in liquidity could maintain solid ground for a future rebound,” Nick Ruck, director at LVRG Research, informed Cointelegraph.
“The market had anticipated no rate cut this week, so this comes as no shock,” Apollo Capital’s chief investment officer, Henrik Andersson, shared with Cointelegraph.
Nonetheless, the market still foresees one to two rate cuts prior to the year’s end.
“We don’t believe this will significantly impact the crypto market; it has been evident for some time that the uncertainty surrounding tariffs will postpone US rate reductions.”
He further mentioned that it was notable that two commissioners dissented, marking the first occurrence of this kind in 30 years. Christopher Waller, a governor, and Michelle Bowman, vice chair for supervision, were in favor of the Fed reducing interest rates by a quarter of a percentage point.
Related: Bitcoin makes ‘big move’ after Fed rate decision, Coinbase Premium turns red
Crypto markets experienced a minor dip following the announcement but have recovered during the Thursday morning trading session in Asia.
Total capitalization stood at approximately $3.94 trillion, maintaining a range-bound channel that has lingered sideways for the past fortnight.
US rate cuts typically enhance crypto markets as lowered interest rates render traditional savings accounts less appealing, driving investors towards higher-risk, higher-reward assets such as cryptocurrencies.
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