Federal Reserve Governor Michelle W. Bowman recently announced that it is now too early to consider an interest rate cut in 2024.
The statement comes at a time when both traditional and cryptocurrency markets are highly sensitive. Expectations for key economic data expected later this week further strengthen the case.
Bowman emphasized in the statement that while the United States has made some progress in managing inflation, the inflation rate remains high and faces various risks. This position is consistent with the cautious monetary policy stance that the Federal Reserve has taken in an uncertain economic environment. She also stressed the importance of the Fed maintaining independence and a non-political stance in the decision-making process.
These comments were made prior to the second revision of the US first quarter GDP data, which is set to be released on Thursday, July 27th. US Personal Consumption Expenditures (PCE) data is expected to be released on Friday.
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Bowman noted, “However, given that the average core consumer price index inflation rate was 3.8% through March of this year, I expect the rate of inflation to remain elevated for some time.”
She also hinted at a potential deviation from global monetary policy trends.
Bearish Trend in Cryptocurrency Markets
The Fed’s monetary policy is putting pressure on market conditions, including the cryptocurrency market. Higher interest rates typically strengthen the US dollar, thereby lowering the prices of assets including cryptocurrencies. Conversely, lower interest rates generally encourage asset price increases as investors seek higher returns in higher-risk markets.
Bowman claims that a rate cut is unlikely before 2025, indicating that borrowing costs will remain relatively high, potentially inhibiting investment inflows into the cryptocurrency market. This situation could exacerbate the recent cryptocurrency crash, as investors may prefer safer and more profitable assets over volatile cryptocurrencies.
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The cryptocurrency market has been volatile recently.
Bitcoin (BTC)
Recently, due to heavy selling, its price fell below $59,000. Factors contributing to this situation include recent BTC sales, the German government’s anticipated payout to Mt. Gox investors worth $9 billion, which further worsened market sentiment.
However, the lack of expected interest rate cuts has exacerbated concerns about long-term market volatility. As traditional financial conditions tighten, interest in higher-risk assets such as cryptocurrencies tends to diminish.
