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Highlights
- The minutes of the meeting released on Wednesday showed that the Fed was still cautioned about its approach toward rate cuts.
- According to the CME FedWatch Tool, markets are pricing in a 93.5% chance that the Fed will maintain its interest rate in its next March meeting.
- Historically, the Federal Reserve's rate decisions have been a vital resource for investors when assessing assets.
Crypto markets are bracing for larger volatility in the financial sphere as the chances of the US Fed cutting rates soon have started to fade. The minutes of the meeting released on Wednesday showed that the Fed was still cautioned about its approach toward rate cuts. The minutes of the meeting also strengthened the rather fact that rates will stay for longer, just as the economic data in the country had indicated.
Fed Stays Cautioned on Rate Cut Trajectory
According to minutes from the Federal Reserve’s most recent meeting, officials stated that they were cautiously optimistic about inflation and that they were not in a rush to lower interest rates. The decision arose after officials chose to maintain the current level of their benchmark overnight borrowing rate and revised the statement issued after the meeting to say that no rate reduction would occur until the Federal Open Market Committee (FOMC), which sets interest rates, had “greater confidence” that inflation was declining.
Fed’s Stance Dulls Optimism about the March Meeting
Fed’s decision to push back rate cuts has taken away all optimism from the upcoming meetings. According to the CME FedWatch Tool, markets are pricing in a 93.5% chance that the Fed will not lower its interest rate in its next March meeting. This comes as an overall hit as since last December, the hopes of the rate cuts happening as early as March had bolstered significantly. However, the Fed’s March meeting will be highly important to take clarity on how the Fed might be viewing the economy then.
But on the brighter side, the minutes of the meeting also showed that the Fed’s policies have proven to be successful overall in the overall economic run. JP Morgan Asset Management global market strategist Gabriela Santos in an interview with Yahoo Finance further asserted that a rate cut might take place in June. “We think [the Fed will] wait until June to be able to garner more of a trend,” he says.
Also Read: With Delay in Fed Rate Cuts Looming, Will Crypto See Block in Bull Run?
Crypto Markets to Brace for Impact While Digesting Fed’s Stance
Historically, the Federal Reserve’s rate decisions have been a vital resource for investors when assessing assets. Lower interest rates frequently devalue government securities, which increases the attraction of assets like cryptocurrencies. Crypto markets are presently preparing for turbulence due to the possibility that investors would continue with traditional assets for some time in light of the Fed’s decision to postpone rate reduction.
On the plus side, though, a strong economy also maintains investor demand. Positive economies tend to have a stable purchasing power and a desire for riskier assets. In such a scenario, regardless of the Fed’s rate decision, cryptocurrency markets might probably maintain their upward pace.
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