Today, the leading cryptocurrency surpassed the $119,000 mark again, prompting altcoins to trend upward. This financial movement follows the Federal Reserve’s first interest rate cut after five consecutive meetings. Recent PCE data indicated limited inflation growth, and this week’s ADP data confirmed a decline in employment, raising questions about the Federal Reserve’s viewpoint on the current economic landscape and potential further interest rate cuts.
Federal Reserve’s Interest Rate Cuts
Though many Federal Reserve members regard current interest rates as slightly restrictive, a minority trio—Miran, Bowman, and Waller—criticizes the excessive monetary policy tightness. With only three Fed members aligned with Trump’s policies, most are hesitant about further cuts, concerned about inflation figures exceeding the 2% target for over four years. Chairman Powell and a few others have indicated that if employment decline persists, two additional rate cuts might occur by the year-end.
Despite recent data, as noted during a discussion with member Logan, many at the Fed remain reticent about approving further cuts, suggesting the cryptocurrency rally might halt, possibly prompting a sell-off for profit-taking.
Key Insights from Logan’s Remarks
Logan emphasized inflation’s continuing trend above the target, with wage growth noticeably decreasing. He highlighted risks on both sides of the Fed’s responsibilities, describing the recent rate cut as a preemptive measure against a sharp, non-linear downturn in the labor market.
The labor market appears balanced yet gradually slowing, and policies are moderately restrictive. Logan warned against over-easing, which could necessitate reversing course. He mentioned nearing maximum employment and noted tariffs have recently contributed to inflation through goods, with their effects being milder than anticipated. However, prolonged tariffs elevate risks to inflation expectations, necessitating caution.
The Fed remains committed to a data-driven approach, aiming for stable economic conditions over time. Logan predicts a slower normalization of policy and projects a slight rise in unemployment, though not significantly.
With the interest rate decision due in 27 days, markets overwhelmingly anticipate a 25bp cut, with a 99% probability. Factors like upcoming employment figures could influence this expectation and must align with ADP’s projections for non-farm employment.
