- Bitcoin price continues to lean south following Fed Chair’s comments on Tuesday.
- Jerome Powell said recent data "shows lack of further progress on inflation."
- Inflation has introduced new uncertainty on whether the Fed can cut rates later this year.
Bitcoin (BTC) price continues to stall with markets leaning south. The outlook was not influenced by statements from the Federal Reserve (Fed) on Tuesday, April 16 speech.
Also Read: US Dollar extends gains following Powell's words
Summary of Fed Chair Powell’s comments
Fed Chair Jerome Powell gave his report on inflation and interest rates, with all signs pointing to the hope for a pivot getting overwhelmed alongside the agency’s fight against inflation.
The Fed’s hope for a pivot appears to be getting overwhelmed, with the sentiment extending to its fight against inflation. It comes on the back of inflationary deficit spending expanding the money supply for years. According to comments by the Fed Chair, these deficits are projected to continue at similar levels at least for the foreseeable future.
POWELL SAID FIRM INFLATION LAST QUARTER HAS INTRODUCED NEW UNCERTAINTY OVER WHEN AND WHETHER THE FED WILL BE ABLE TO LOWER RATES LATER THIS YEAR
— *Walter Bloomberg (@DeItaone) April 16, 2024
The highlights of the report include:
- There has been a lack of further progress on inflation based on recent data.
- There is new uncertainty concerning whether the Fed can cut rates later this year because of inflation data from the last quarter.
- Fed can maintain higher rates for "as long as needed," said Powell, adding that recent data has not given greater confidence on inflation.
- Powell also observed that restrictive Fed policy needs more time to work, articulating that it will likely take longer to "regain confidence" on inflation returning to 2%.
The reversal is surprising, considering the Fed was talking about how many rate cuts are coming this year less than three months ago. Now, it is a question of whether rate cuts even come at all.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
At the time of writing, Bitcoin price is trading for $62,747, maintaining the price action that had been seen during the Asian session. Among the factors influencing investor sentiment include the oncoming BTC halving on April 20 and turmoil in the Middle East that has investors fleeing to safety offered by the more traditional assets.
BTC/USDT 1-day chart
Also Read: Bitcoin price tanks to $62K ascribed to geopolitical tension a week to BTC halving
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
Polygon joins forces with WSPN to expand stablecoin adoption
WSPN, a stablecoin infrastructure company based in Singapore, has teamed up with Polygon Labs to make its stablecoin, WUSD, more useful in payment and decentralized finance.
Coinbase envisages listing of more meme coins amid regulatory optimism
Donald Trump's expected return to the White House creates excitement in the cryptocurrency sector, especially at Coinbase, the largest US-based crypto exchange. The platform is optimistic that the new administration will focus on regulatory clarity, which could lead to more token listings, including popular meme coins.
Cardano's ADA leaps to 2.5-year high of 90 cents as whale holdings exceed $12B
As Bitcoin (BTC) gets closer to the $100,000 mark for the first time — it crossed $99,000 earlier Friday — capital is rotating into alternative cryptocurrencies, creating a buzz in the broader crypto market.
Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange
Shiba Inu trades slightly higher, around $0.000024, on Thursday after declining more than 5% the previous week. SHIB’s on-chain metrics project a bullish outlook as holders accumulate recent dips, and dormant wallets are on the move, all pointing to a recovery in the cards.
Bitcoin: New high of $100K or correction to $78K?
Bitcoin surged to a new all-time high of $93,265 in the first half of the week, followed by a slight decline in the latter half. Reports highlight that Bitcoin’s current level is still not overvalued and could target levels above $100,000 in the coming weeks.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.