The fluctuation in the price of Bitcoin is also a result of the problems in the US economy. Uncertainty prevails in the short term. The latest data shows that the economy is weakening while inflation is not falling as desired. On the other hand, while the Fed aims to cut interest rates by 75bp this year, the market's expectation of a 150bp cut has long been forgotten. In fact, whether there will be a 75bp cut or not remains uncertain today.
Fed Statements
The importance of the statements to be made by members after the latest data and the Fed's May interest rate decision has increased even more. At the time of writing, Fed Member Kashkari, in important statements, seems to have doubts about the tightness of the current interest rate. Here are some highlights from the ongoing statement:
"The progress seen in inflation in the second half of 2023 seems to have stopped. The real question is whether disinflation is still continuing or just taking longer. Given the inflation data, I question the policy's restrictiveness. The housing market proves to be more resilient to tight monetary policy than in the past. The resilience in the housing market raises questions about the neutral interest rate. The flexibility in the housing market could mean at least a short-term upward adjustment in the neutral interest rate. The question facing the Fed is whether disinflation is still continuing. I modestly raised my estimate of the neutral interest rate from 2% to 2.5%."
A half-point increase from 2% may also lead to a target change on the inflation front. Under current conditions, it does not seem possible for the Fed to reach its 2% inflation target in the set time frame.