FED : Almost Certain Status Quo in May
Despite still high inflation, the Federal Reserve (Fed) seems inclined to take a pause in monetary tightening at its May 7 meeting. Analysts’ forecasts indicate nearly 98% chance of no rate hike or cut this time.
Although the benchmark rates have reached a particularly high level (between 5.25% and 5.50%), the central bank prefers to observe the economic situation before acting again. This “pause” should be welcomed by crypto investors, who fear the effects of too rapid monetary tightening.
However, June seems more interesting from a monetary perspective. Market forecasts suggest there is about 25% likelihood that the Fed will cut its rates at this point. This possibility would materialize if employment or inflation indicators show signs of weakness.
Conversely, if inflation remains stubborn, the central bank could maintain a restrictive stance or even consider extending the period of high rates. These decisions will directly impact the valuation of risky assets, including cryptocurrencies.
Jerome Powell’s Tone More Determining than Fed’s Decisions
Paradoxically, investors will likely react more to the statements of Fed Chair, Jerome Powell, than to the actions themselves. His speech and tone during the press conference could influence movements in tech stocks, bonds, the dollar, and even crypto assets like Bitcoin.
Too strong a language on “persistence of inflation” or “lack of progress” could trigger a massive sell-off in the markets. Conversely, a more nuanced message or indicating openness to future cuts could boost risky assets.
In conclusion, the upcoming Fed meeting will be closely watched by the crypto community. Even though the May decisions seem certain, investors will need to listen to Jerome Powell’s statements to try to anticipate market movements.
