[Uncertainty about U.S. inflation data rises, cryptocurrency market falls]
Federal Reserve Chairman Jerome Powell warned that actual results may differ. Unexpected economic conditions have challenged the Federal Reserve's recent forecasts.
While key inflation indicators have held steady following aggressive rate hikes in 2022 and 2023, economic risks have become more complex, with data often conflicting. For example, U.S. companies added 272,000 jobs in May and wages rose at an annual rate of 4.1%, yet the unemployment rate rose to 4%.
"In recent months, there has been a lack of further progress toward the Committee's 2 percent inflation objective," the Fed wrote after its last meeting on May 1.
Therefore, the Fed is cautious about cutting interest rates until inflation improves significantly. Legislators have questioned whether inflation can reach the 2% target without tightening monetary policy. The Fed's stance on cutting rates contrasts with some global peers, such as the European Central Bank and the Bank of Canada, which have recently slashed interest rates. According to a report by Wall Street Journal reporter Nick Timiraos, JPMorgan Chase and Citigroup dropped forecasts for a July rate cut following Friday's jobs report.
"Most sell-side economists and other professional Fed watchers now expect one or two rate cuts in September or December this year," he added.
In addition to JPMorgan Chase & Co. and Citigroup, various financial institutions have forecasted expected rate cuts from the Federal Reserve in 2024. Most forecasts suggest the earliest rate cut could happen in September, while some predict December.
Matteo Greco, a research analyst at Fineqia, shared his thoughts on the current situation with BeInCrypto. He explained that less restrictive monetary policy is generally beneficial for risk assets such as stocks and cryptocurrencies. This is especially relevant when rate cuts do not signal an impending recession.
"In this context, the central bank's decision to cut interest rates while inflation is above target demonstrates optimism about managing inflation and maintaining it near desired levels under a more expansionary monetary policy," he said pointed out.
