The Fed is Expected to Cut Interest Rates in May: Effects on Crypto Markets

Jerome Powell shelved a possible interest rate cut in March. Regional bank stresses and economic indicators point to a change in interest rate policy. Crypto markets could be affected by this situation, and the policy change in May could be positive for crypto.

Market participants expect the Fed to begin cutting interest rates in May. It was thought that the Fed would cut rates in March, but recent statements by Jerome Powell have tempered those expectations. Powell stated that they are waiting for a greater level of confidence to emerge before proceeding with a rate cut.

“We have said we want to be more confident that inflation will drop to 2%. I don’t think it’s likely that the Committee will reach this level of confidence by the time of our meeting in seven weeks,” Powell explained.

Thoughts on the Crypto Industry Following the Fed’s Decision

André Dragosch, the Head of Research at ETC Group, discussed the relationship between crypto markets and the Fed’s interest rate policy. Dragosch argued that concerns regarding the regional banking system and the increase in the unemployment rate in the U.S. could trigger a change in the Fed’s interest rate policy, and “counterintuitively increase the likelihood of an earlier rate cut.”

Following Powell’s statement last week that “I do not expect a cut in March,” Bitcoin and other altcoins rapidly lost value. The crypto market is expected to recover following a decision to cut rates at the meeting in May.

A significant policy change like the Fed’s interest rate cut can increase volatility in the short term. As for how the crypto market might react to a potential delay in the interest rate cut until May, an initial sell-off could occur. However, the change in monetary policy could have a positive impact on cryptocurrencies in the long run.

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