As the article is prepared, Fed members are making significant statements. The comments from Kashkari and Bostic are critical for interest rate reductions. For the future of cryptocurrency markets, the Fed needs to continue its steady reduction while expanding its balance sheet. What are the key takeaways from the members’ recent statements?
Fed and Cryptocurrencies
Following a strong 50 basis point interest rate cut, the Fed will strive to clarify its market outlook through the members’ statements. Therefore, understanding their positions ahead of meetings before the year’s end involves examining their comments. Bostic and Kashkari discuss employment, interest rates, and future projections. Key points from Bostic’s remarks include:
- The labor market is not flashing red; I am optimistic about the future.
- I expect demand to continue sustaining employment. I do not foresee a further rise in unemployment.
- As long as consumer spending continues, there will be demand for products and consequently for workers.
- The Fed is not in a mad rush toward neutral levels, nor does it presume the job is done regarding inflation.
- The labor market is weakening but not weak.
- Disagreements about neutral rates are insignificant given interest rates are this high.
- Recent data convincingly shows the U.S. is on a sustainable path for price stability.
- The recent low levels of some inflation indicators are a positive sign.
- The Fed currently faces two largely balanced risks.
- Businesses are being more cautious in hiring but are not considering layoffs.
- The risks to the labor market have increased, with the likelihood of widespread weakness higher than a year ago.
- This half-point cut does not set a tempo for future interest rate reductions.
- I supported the 50 basis point cut as a balance between uncertainty regarding inflation and risks in the labor market.
Kashkari also made notable statements:
- I predict another 50 basis point cut in 2024.
- The labor market is not driving inflation.
- There is much uncertainty about how far the Fed will cut rates.
- Both a 25 or 50 basis point cut would be reasonable. The 50 basis point cut was a significant step to initiate the process.
- I expect the Fed to take smaller steps moving forward.
- An increase in unemployment poses a greater risk than inflation.
- There is significant uncertainty about what the neutral interest rate is.
- The Fed policy remains in a tight position.
- The labor market is strong, and we want to keep it that way.
- We will not declare mission accomplished regarding inflation.
The Fed has two core mandates: maintaining price stability and protecting employment. Kashkari’s comments suggest that while there have been times when employment was not prioritized in the fight against inflation, the situation may now favor the latter, which is positive for cryptocurrencies.
After falling below the 100.5 level, the DXY index has returned to the 101 threshold.
