Hot Development: Cryptocurrency Falls Again with Statements from 3 Fed Members
Fed member Logan believes that the neutral interest rate may have risen. While inflation has stabilized, members may begin to advocate for further interest rate increases. The soft landing scenario is being put on hold.
While this text was being prepared, the price of Bitcoin quickly dropped from over $63,000 to $62,300. We’ve become accustomed to such drops, sometimes exceeding $1,000. Rapid declines following feeble recoveries significantly dampen investors’ risk appetite. The cause of this drop could be statements made by Fed members at the time of writing.
Why Are Cryptocurrencies Falling?
Investors who believed that the Fed would cut rates by 150 basis points for 2024 at the end of last year had doubled their expectations for a 75 basis point cut. However, following inflation data in the first quarter, the expectation for interest rate cuts for this year has already fallen to as low as 50 basis points, falling below the Fed’s expectations as well.
At the time this text was prepared, Fed’s Logan said the following:
“The first-quarter inflation data was disappointing. While the labor market and the economy are strong, we have made significant progress on inflation. However, there are significant upward risks to inflation. There are uncertainties about whether the policy is sufficiently restrictive. It is still too early to consider lowering interest rates. There is no soft landing yet. I still see good reasons for inflation to reach 2%. The neutral interest rate level may have risen. A strong economy could be a sign of a higher neutral interest rate. Considering the high interest rates, the resilience of the economy is surprising.”
As we can gather from the messages conveyed in his remarks, Logan appears to be poised to even consider interest rate hikes in the next phase. Fed’s Kashkari highlighted the importance of artificial intelligence for productivity, while another Fed member, Bowman, said:
“We need to keep monetary policy stable for a while longer. There is ongoing momentum in the economy.”
Following all these statements, BTC fell, while the price of ETH dropped back below $3,000.
Note: This is not investment advice.
