As the cryptocurrency market experiences a surge, with Bitcoin BTC/USD breaking the $60,000 mark, analysts at JPMorgan are speculating on the potential impact this could have on the Federal Reserve’s monetary policy.
What Happened: JPMorgan has indicated the recent bitcoin rally might influence the Federal Reserve’s interest rate decisions, Business Insider reported on Thursday
Strategist Marko Kolanovic noted that Bitcoin’s climb over $60,000, along with stock market highs, is a sign of increasing speculation in risk assets. “This may keep monetary policy higher for longer, as premature rate cutting risks further inflating asset prices or causing another leg up in inflation,” Kolanovic said.
The market has been expecting at least three rate cuts from the Fed in 2024, with the first anticipated in June. However, the current surge in bitcoin and stocks might prompt a more cautious approach from the Fed.
Despite the stock market’s gains on the back of expected rate cuts and controlled inflation, Kolanovic warns that a delay in rate reductions could disrupt the market’s positive outlook.
He quoted Fed governor Christopher Waller, “If the disinflation is still immaculate, ‘what’s the rush?'”
See Also: Shiba Inu Burns 100M Tokens In Single Transaction: ‘Another 120% Move From Here,’ Predicts Trader
Why It Matters: The Federal Reserve, led by Chair Jerome Powell, has been cautious about adjusting interest rates. During a session with the House Financial Services Committee, Powell stressed the need for more data before considering rate cuts. He acknowledged progress in controlling inflation and the economy’s success in achieving near-50-year low unemployment rates.
Following Powell’s comments, the S&P 500 reached all-time highs, fueled by his hints at potential rate cuts during a Senate Banking Committee meeting on March 7. This optimism was reflected in the broader markets, with the Nasdaq 100 also nearing record levels.
However, with Bitcoin’s price reaching new heights, cautionary voices like that of cryptocurrency expert Raoul Pal have emerged. Pal warned against overconfidence in the crypto market, suggesting that it could lead to significant setbacks.
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