Crypto markets have long tried to pick up signals to take an upward trajectory. However, since Bitcoin ETFs were approved, the world of digital assets has been severely limited. One event that might have brought some sense of relief to cryptocurrency markets was the US Federal Reserve's interest rate decision. However, the hawkish tone from several Fed officials has signaled that the cuts rates could take longer than expected. In the latest development of the Federal Reserve's decision to reject rate cuts, a non-voting member of the Federal Open Market Committee has taken a bearish stance on the future of interest rates.
Susan Collins signals delay in Fed rate cuts
According to a report Per Yahoo Finance, before cutting interest rates, Boston Fed President Susan Collins said she needed more evidence that inflation is returning to the Fed's 2% target. However, she added that the rate reduction could occur "later this year." During a conference in Boston, Collins said: "I will need to see more evidence before I consider adjusting the policy stance." Collins is a non-voting member of the Federal Reserve's Federal Open Market Committee, which sets interest rate policy.
The Federal Open Market Committee had previously decided maintain the target range for the federal funds rate between 5.25% and 5.5. It also voted unanimously to keep the interest rate paid on reserve balances at 5.4 percent, effective Feb. 1, 2024. The market had priced in a near 96% chance that the Federal Reserve would keep rates on hold. stable. according to the CME FedWatch tool.
Collin's comments resonate with those of other Federal Reserve officials, especially Chairman Jerome Powell. Powell had noted in his speech that economic conditions as such do not pave the way for rate cuts to occur soon. However, global markets, including the crypto sphere, expected the Federal Reserve to signal rate cuts as early as March this year.
Economic data points to delay in rate cuts
Various data in the United States have solidified the idea that the Federal Reserve could be right with its decision not to start cutting rates soon. According Deloitte, the United States had a surprising and unexpected increase in employment in January. Current data suggests that job growth is well above expectations.
In a similar vein, the January ISM Manufacturing PMI came by 49.1%, beating Wall Street's forecast of 47.2 percent. The figures also increased from 47.1% the previous month. Although it does not reach the 50 readings necessary to indicate an increase in the sector, this value was the highest since October 2022.
Although the Fed's rate decision path is not based on these two data points alone, it does significantly fuel concerns that a rate cut could take time in the future.
Crypto Markets Will Face Volatile Trading as Fed Concerns Loom
The Federal Reserve's rate decisions have long been a key indicator that investors use to evaluate investments. Lower interest rates often increase the attractiveness of assets like cryptocurrencies by devaluing government securities. According According to The New York Times, there has been a fluctuation in anticipation of rate cuts in recent months. Following the Federal Reserve's December signal that rate cuts would likely occur sometime in 2024, the futures market began anticipating that rate cuts would begin at the Federal Reserve's March meeting.
However, with recent events, financial markets have braced themselves for volatility ahead. Even a slight sign of future rate cuts by the Federal Reserve can help increase risk appetite among investors, resulting in more trading volumes in the cryptocurrency market. But currently, in the absence of positive signs, trading in the cryptocurrency market seems to be on its way to some turbulence.
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