This week, cryptocurrency enthusiasts have been buoyed by recent market surges, igniting excitement for further growth. However, several developments are emerging, threatening to reverse this progress. Recently, Federal Reserve member Austan Goolsbee made significant remarks that could influence the upcoming economic decisions.
Expectations of Fed Rate Cuts
Before the announcement of trade tariffs, there were strong expectations of a Federal Reserve interest rate cut in September. Yet, these probabilities have waned following President Trump’s re-imposition of rates in April, affecting trade negotiations. New inflation figures are set to release next Tuesday and Wednesday, adding to the volatility of the current market.
Austan Goolsbee, President of the Chicago Fed, has pointed out that the new rates announced by President Trump negatively impact inflation projections. He explained these higher rates hinder the path for interest rate cuts. His candid commentary may not be the news President Trump desires to hear.
In a recent interview, Goolsbee shared that suspended tariffs initially pointed the Fed towards rate reductions, but the reintroduced tariffs altered this course. On August 1, a 35% tax on Canada and a 50% tax on Brazil will be imposed, with approximately 20 other countries seeing rates from April enforced.
Fed’s Current Stance and Future Implications
Jerome Powell, the Fed chairman, consistently mentions the Fed is well-positioned to observe developments before acting, asserting that current rates are not excessively tight. While the Fed has maintained steady rates since December, there is growing concern over whether inflation will continue to fall.
Goolsbee stands out among Fed members, as he has advocated for an earlier interest rate reduction. While recent comments from Waller hinted at supporting rate cuts, Bowman remains uncertain. Despite past advocacy, Goolsbee now appears to retract his stance.
“Adding factors to the mix complicates answering if prices will rise or not.” – Goolsbee
With unemployment less severe than expected and inflation on the rise, elevated tariff rates effective August 1 are anticipated. The effective duty stands at 20%, leading many Fed members to propose holding off on rate cuts. The upcoming Fed meeting has a 95.3% likelihood of rates remaining unchanged, with a 61% expectation of a September rate cut.
