Bitcoin Market Eyes Powell’s Stance on Trump’s Economic Policies Amid Fed Rate Cut
The upcoming 25-basis point Fed rate cut is largely anticipated, with market focus on Chairman Jerome Powell’s commentary on President-elect Trump’s inflationary policies. Expectations indicate a potential volatility in Bitcoin prices based on Powell’s responses regarding Trump’s economic strategies, particularly concerning import tariffs and fiscal spending, with the overarching concern being inflation and its impact on interest rates.
The anticipated 25-basis point rate cut by the Federal Reserve on Thursday is expected to be largely anticipated without significant market impact. Market participants are more inclined to focus on Federal Reserve Chairman Jerome Powell’s insights regarding President-elect Donald Trump’s proposed inflationary policies, which include increased fiscal spending and import tariffs. The overarching theme is that while the rate cut may be priced in, comments on potential inflation that could stem from Trump’s economic approach are crucial for Bitcoin (BTC) traders. The Federal Reserve’s previous move to cut interest rates by 50 basis points in September initiated a liquidity easing phase favorable to risk assets such as cryptocurrencies. According to the CME’s FedWatch tool, traders indicate an almost certain expectation of the rate cut, anticipating the new target range to be between 4.5% and 4.7%. The consensus indicates that current rates are positioned above the neutral benchmark of 3%-3.5%, suggesting ample opportunity for reductions in monetary policy as economic conditions evolve. Market dynamics may shift significantly depending on Powell’s remarks regarding Trump’s economic strategy. The Republican candidate’s policies, which include proposed tax reductions and heightened import tariffs, pose a risk of renewed inflation pressures. If Powell addresses these issues, traders may react with volatility in Bitcoin and other assets, particularly if he signals apprehension about the potential inflationary trajectory stemming from Trump’s proposals. Conversely, if Powell maintains a data-dependent outlook and refrains from extensive commentary on Trump’s plans, market sentiment may remain favorable, continuing the recent bullish trend in BTC, which saw record highs above $75,000. After misjudging inflationary pressures during the pandemic, the Fed is now likely to adopt a prudent approach to further rate reductions, particularly in light of potential tariff increases. Bank of America’s global research insights suggest that the Fed may pause its rate-cutting agenda if tariffs lead to significant economic shifts, pointing towards a need for vigilance in fiscal management. Ultimately, the market’s response will pivot on Powell’s handling of questions regarding Trump’s economic policy during the upcoming press conference.
The occurrence of a 25-basis point rate cut by the Federal Reserve is framed against the backdrop of President-elect Donald Trump’s economic policies, which have implications for inflation and market stability. Following a substantial 50 bps rate cut in September that was designed to ease liquidity, the market has been adjusting expectations for further cuts, reflecting a shift in focus towards Trump’s proposed fiscal strategies. Such strategies include expanded fiscal spending and tariffs, which are crucial factors that could influence inflation and monetary policy going forward.
In summary, while the 25-basis point rate cut from the Federal Reserve is expected to have limited immediate impact, the reactions of market participants will heavily depend on Chairman Powell’s comments regarding President-elect Trump’s economic policies. Should Powell address concerns about inflation arising from Trump’s agenda, volatility may ensue in the cryptocurrency markets. Conversely, an emphasis on data-dependence without significant commentary on Trump’s plans could sustain the positive momentum seen in Bitcoin prices and other risk assets.
Original Source: www.coindesk.com
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