Fed Chair Powell’s Speech Impact: Inflation, Rate Hikes, and Bitcoin Market Volatility

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Federal Reserve Chairman Jerome Powell is set to take part in the Perspectives on Monetary Policy panel before the Thomas Laubach Research Conference on May 19. Market participants have been expecting a pause or hawkish pause, but Fed officials appear to be leaning more towards raising interest rates.

Ahead of Powell’s speech, Federal Reserve Bank of New York President John Williams and Federal Reserve Board Governor Michelle Bowman shared their outlook on monetary policy. Bowman has opposed a broad overhaul of banking rules but agrees with the need for more rate hikes to bring inflation under control. Williams shares this view as well. Furthermore, Fed officials including Dallas Fed President Lorie Logan and Fed Governor Philip Jefferson argued that inflation remains too high, and data doesn’t justify pausing a rate hike in June. Cleveland Fed President Loretta Mester also stated that the central bank hasn’t reached a point where it can “hold” rates.

US jobless claims decreased to 242,000 from 264,000 the previous week, an indication of a tight labor market. This provides the Federal Reserve an opportunity to continue implementing interest rate hikes in order to combat inflation.

Meanwhile, Bank of England‘s Jonathan Haskel believes the jobs market is tight and that quantitative tightening may increase to curb inflation. Last week’s 12th rate rise by the BOE sends a strong message, even amid weak economic data. On the other hand, ECB’s Isabel Schnabel has been direct about the European Central Bank’s aim to keep raising borrowing costs until core inflation reaches 2%.

Equity markets are edging higher as investors remain optimistic that a deal on the US debt ceiling could be reached in the coming days. The US dollar index (DXY) hovers around 103.4, after touching a two-month high of 103.6 on Thursday following a drop in jobless claims. Additionally, CME FedWatch indicates a 45% probability of another 25 bps, which increased from 15% last week as Fed officials continue raising rates further.

BTC prices have fallen 2% in the last 24 hours, currently trading near $26,800. The 24-hour low and high are $26,415 and $27,466, respectively. Whales and miners are selling their BTC holdings, anticipating a further price drop due to macro factors. This comes as markets speculate on the impact of Fed Chair Powell’s speech on Bitcoin prices.

Ultimately, the cryptocurrency community will be closely watching these monetary policy developments, balancing optimism with skepticism as the market remains volatile.

Source: Coingape

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