Jerome Powell Signals Fed Rate Cuts Still Possible Amid Labor Market Risks

Federal Reserve Chair Jerome Powell has signaled that they could still make Fed rate cuts this year as labor market risks persist. He also cited inflation risks but noted that the impact of the war in Iran and rising oil prices on inflation remains uncertain.

Fed Rate Cut This Year Still Possible, Powell Signals

Speaking at Harvard today, the Fed chair suggested that a rate cut this year was still possible, noting downside risks to the labor market. “There’s sort of downside risk to the labor market, which suggests keep rates low, but there’s upside risk to inflation, which suggests maybe don’t keep rates low,” he said.

Powell’s comments come at a time when the war in Iran is sparking inflation fears, especially as oil prices rise to multi-year highs. This has led traders to price out Fed rate cuts, with market participants speculating that a rate hike is more likely at the moment to curb inflation.

As CoinGape reported, Fed President Austan Goolsbee said last week that a Fed rate hike was possible, with inflation becoming the priority over the labor market. However, Powell suggested that the impact of the Iran war, especially the oil shock, on inflation remains uncertain. He also remarked that they are in a good position to wait and see how things play out, indicating that a rate pause is the most likely decision for now.

However, his comments have again provided optimism that a Fed rate cut may still be on the cards this year, especially if the labor market weakens again. On the other hand, Powell suggested that a rate hike may become a real possibility if the war in Iran prolongs.

The Bitcoin price rose sharply on the back of Jerome Powell’s comments, reaching around $67,800. The leading crypto is currently trading at around $67,700, up over 2% today, according to TradingView data.

Odds of a Rate Hike Fall

The odds of a Fed rate hike have fallen from around 25% to 22%, according to Polymarket data. Meanwhile, crypto traders are now pricing in at least one Fed rate cut this year following Jerome Powell’s speech.

Furthermore, Polymarket data show that crypto traders expect this Fed rate cut to happen at the October FOMC meeting. There is currently a 51% chance the Fed will lower rates at the October meeting, while there is a 64% chance the U.S. central bank will lower rates at the December meeting.

In the meantime, crypto traders expect the Fed to hold rates steady at the upcoming FOMC meetings. There is only 2% chance that the FOMC will lower rates at the April meeting. CME FedWatch data shows a 99.5% chance that the Fed will hold rates steady at that meeting.