Federal Reserve Chair Jerome Powell delivered remarks at Harvard University, emphasizing that inflation expectations in the United States remain “well-anchored.” Immediately following Powell’s comments, the yield on the U.S. 10-year Treasury note fell by nine basis points to 4.35 percent. Additionally, market expectations for another rate hike dropped dramatically in a single session—from 25 percent to just 5 percent.
Fed’s tone and initial market response
Powell’s statements prompted swift reactions in the bond market. The yield on the two-year Treasury note followed suit, sliding eight basis points to 3.83 percent. In his speech, Powell noted that while the Fed does not dwell on short-term oil price shocks, it remains squarely focused on inflation expectations when setting monetary policy.
He also pointed out that past large-scale asset purchases by the Fed had lowered interest rates and supported economic activity, but emphasized that there is no clear evidence these purchases contributed to higher inflation. Powell added that the central bank would refrain from major policy moves until the impact on the broader economy becomes more apparent.
During his Harvard address, Powell reiterated the Fed’s commitment to bringing inflation back down to two percent, while also highlighting that economic risks remain present on both the upside and downside.
Falling bond yields, in turn, may structurally benefit riskier assets by reducing their opportunity cost. Cryptocurrencies, particularly Bitcoin, could see support as a result. However, despite an attempt to rally during Monday’s trading session, Bitcoin slid back to as low as $66,500 by the end of the day.
Oil prices add pressure to cryptocurrency markets
As April drew to a close, the price of West Texas Intermediate (WTI) crude jumped 5.3 percent, closing at $104.80 per barrel. For the first time since 2022, oil broke above the $100 threshold. Heightened tensions between the U.S. and Iran have led to concerns over supply disruptions, sending prices higher and intensifying fears that inflation could reaccelerate.
This spike in energy prices tests the Fed’s confidence in the current macroeconomic backdrop, according to Lon Erickson of Los Alamos Investment. While Powell continues to stress that inflation expectations remain steady, persistent high energy prices could delay the timeline for any interest rate cuts, in the view of market participants.
In its most recent March meeting, the Fed kept its policy rate steady for a second time at 3.5–3.75 percent. The central bank’s year-end projections currently point to only a single rate cut before the close of 2024.
Should oil prices remain above $100 per barrel for an extended period, inflation may well accelerate once more. Such a scenario could sap risk appetite and stoke further volatility in the cryptocurrency market.
Key levels and short-term outlook for Bitcoin
For now, Bitcoin is contending with two opposing forces: the Fed chair’s latest dovish hints and renewed upward pressure on oil prices. Should Powell signal a more accommodative tone at the next FOMC meeting and oil prices drop back below $95 per barrel, inflationary pressures may ease—potentially opening up fresh upside for Bitcoin.
Amid this uncertain backdrop, markets continue to seek direction. Bitcoin is currently oscillating within a wide range between $63,000 and $68,500, with no clear breakout in sight. The $63,000 mark has emerged as a critical support level; a decisive move below that threshold could result in more severe losses for the cryptocurrency.
Analysts emphasize that near-term trends in both inflation data and crude oil prices will continue to play a decisive role. Should volatility in oil prices or inflation figures prompt the Fed to revise its rate policy, cryptocurrencies may again come under heightened selling pressure.
