Crypto Markets Watch as Atlanta Fed Hints at a Pause After Subsequent Rate Cut

Crypto markets and the entire financial world are gaging the Fed’s stance on upcoming rate cuts. Currently, the trajectory of how the rate cuts will proceed is still uncertain. On Monday, the Atlanta Fed, however, released a statement hinting that there are chances that the Federal Reserve might keep a pause on rates after its first cut.

Fed to stick to a Pause after the First Rate Cut

According to a Bloomberg report, president of the Federal Reserve Bank of Atlanta Raphael Bostic stated that he anticipates the Fed would pause the following meeting to evaluate the impact of the policy change on the economy after its first interest rate cut, which he has scheduled for the third quarter.

Bloomberg also highlights that in a different editorial posted on the Atlanta Fed website on Monday, Bostic expressed concern that companies may get overly optimistic and spur additional demand following a rate decrease, which would increase price pressure. At a press conference, he informed reporters that this might be one more justification for delaying rate cuts.

The timeline could be a little deviating from the previous commitments of at least three rate cuts in the year 2024. However, the certainty of that is not yet confirmed. If data points suggest, and the Fed believes that it has controlled inflation significantly, the rate cuts might still be on the cards in the near term.

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Atlanta Fed’s Previous Caution about Crypto Markets

Atlanta Fed’s current statement comes just a week after it had cautioned financial institutions about dealing with crypto transactions. In a statement, the Federal Reserve Bank of Atlanta cautioned other institutions about the dangers associated with cryptocurrency and blockchain. The cautious approach used by the Atlanta Fed also recommended banks abide by all Federal Reserve guidelines when it comes to doing cryptocurrency transactions.

How Does the Fed’s Decision Affect the Crypto World?

In the past, investors have mostly used the Federal Reserve’s rate decisions as a guide for assessing assets. Lower interest rates frequently devalue government securities, which increases the attraction of assets like cryptocurrencies. The likelihood that investors would continue to hold traditional assets in the wake of the Fed’s decision to postpone rate reductions has made the cryptocurrency markets more volatile.

On the plus side, though, a strong economy also maintains high investment demand. Purchasing power is frequently stable in positive economies, and riskier investments are preferred. In such a scenario, regardless of the Fed’s decision, cryptocurrency markets are likely to continue climbing at the current rate.