Massive Setback For Crypto Ahead Of US PCE Report

The US Personal Consumption Expenditure (PCE) report is due on Friday, March 1. Ahead of the report, the crypto market was hit by a massive setback due to a delay in the anticipated rate cuts by the Federal Reserve. According to analysis by Jim Bianco, President and Macro Strategist at Bianco Research, Fed is unlikely to introduce rate cuts before September this year.

Fed Unlikely To Introduce Rate Cut Before September

Bianco highlighted that the probabilities of a Federal Reserve rate cut are on a downtrend leading up to the next four FOMC meetings. With March and May meetings having almost no possibility for cuts, attention turns to June and July. However, he noted that if February’s payroll and CPI data continue to show strength, markets may retract expectations for cuts in these months.

The Fed faces a delicate balancing act amid political scrutiny, especially with the September 18 meeting preceding the election and the November 7 meeting occurring the day after. This situation suggests that the Fed is unlikely to introduce rate cuts before September. Moreover, Bianco spotlighted that the Fed’s claims of not being indulged in politics would be proved false as announcing a rate cut just six weeks prior to the elections could be justified as a political move.

This week, Wall Street is poised with anticipation, as a high-impact event looms on the U.S. calendar, which is the core PCE data report. It is the Federal Reserve’s preferred gauge of inflation. The impending release of this report is expected to inject volatility into the market, potentially reshaping sentiment. Traders are advised to brace themselves for possible turbulent price movements and remain agile in responding to sudden shifts in market dynamics.

Forecasts suggest that January’s core PCE could show a 0.4% uptick compared to the preceding month. This uptick may translate to a marginal dip in the annual figure from 2.9% to 2.7%, signaling a modest but encouraging shift in direction. However, traders are cautioned against complacency, as the official results could spring surprises, echoing the patterns observed in recent CPI and PPI surveys conducted a few weeks earlier.

Also Read: Crypto Market: PCE & Other Events To Watch Amid Fed Rate-Cut Speculations

FOMC Officials Announce Delay In Interest Cuts

New York Federal Reserve President John Williams remains steadfast in his assessment that the U.S. central bank is poised to reduce interest rates “later this year,” despite the January data showing stronger-than-expected inflation and labor market performance. In an interview with Axios, Williams emphasized that his overall perspective on the economy remains unchanged, asserting, “My overall view of the economy basically hasn’t changed based on one month of data.”

Addressing concerns about inflation, Williams acknowledged that progress toward the Fed’s 2% target could encounter bumps along the way but affirmed confidence in the economy’s trajectory. He stated, “Inflation’s progress toward the Fed’s 2% goal can be ‘a little bit bumpy,’ but that overall it and the economy more broadly are headed ‘in the right direction.'”

Echoing sentiments expressed by other Fed policymakers, Williams hinted at a cautious approach to rate cuts, emphasizing the need for more confidence in inflation’s downward trend before initiating such measures. He remarked, “At some point, I think it will be appropriate to pull back on restrictive monetary policy, likely later this year.”

As an influential figure within the FOMC, Williams refrained from specifying his preferred timing for rate adjustments or the precise triggers for such actions. However, he stressed the importance of assessing various indicators collectively. He noted, “It’s really about reading that data and looking for consistent signs that inflation is not only coming down, but is moving towards that 2% longer-run goal.”

Williams emphasized that while significant changes in the economic outlook could prompt reassessment, rate hikes are not his primary expectation. He highlighted the need for a comprehensive analysis encompassing labor market dynamics and other indicators to discern the appropriate course of action.

Also Read: Crypto Markets on Cautious Watch as US Stock Surge Cements Fed’s View