According to ING, the Federal Reserve may hold off on cutting interest rates for a while, but when the cuts do come, they could be more aggressive than expected.
On Wednesday, the Federal Reserve opted to keep its benchmark interest rate unchanged between 4.25% and 4.5%. During the subsequent press conference, Chairman Jerome Powell hinted at the possibility of stagflation, as concerns over inflation and unemployment continued to grow.
Both traditional markets and cryptocurrencies were closely watching Powell’s remarks for any signals of an imminent rate cut, especially with the upcoming June meeting on the horizon. ING notes that Powell’s statements—specifically, that “uncertainty about the economic outlook has increased” and that “the risks of higher unemployment and higher inflation have risen”—suggest that the Fed might maintain a cautious approach for at least a few more meetings.
ING emphasized that the Fed’s reluctance to act could result in rate cuts being delayed. However, once the central bank gains confidence in the economic data, those cuts could come swiftly and be more substantial than expected. The bank’s analysts expect this “wait-and-see” approach to persist through at least September.
The Fed’s hesitancy to take action is largely driven by concerns over the impact of trade wars and disruptions in global supply chains, which could exacerbate inflationary pressures.
In response to these developments, Bitcoin saw a notable rally, rising from $96,000 to $99,500 since the Fed’s announcement, with a potential trade deal between the U.S. and another major economy helping to restore some optimism in the markets.
