Investors and economists are increasingly skeptical about the likelihood of global central banks implementing rate cuts this year, according to a report from The New York Times [057a0527]. The Federal Reserve's preferred inflation metric rose to 2.7% in March, above expectations of 2.6%. This has led investors to bet that central banks will be forced to delay rate cuts. The uncertainty surrounding the Fed's rate-cutting plans is causing concern among investors, as reported by the Financial Times [6846e2b2] [6ba6e799].
Investors are pushing back their expectations of interest rate cuts around the world, as the US Federal Reserve’s battle with price pressures complicates other central banks’ loosening plans, according to The Australian Financial Review [1d6dc56e]. The US reported poor inflation figures, causing markets to rein in their forecasts for rate cuts by the European Central Bank (ECB) and the Bank of England (BoE), as well as by the Fed itself. Traders now expect the ECB to cut rates by an average of about 0.7 percentage points this year starting at its next policy meeting on June 6, while two weeks ago they expected cumulative cuts of 0.88 points. Markets now anticipate BoE cuts of 0.44 percentage points this year compared with 0.56 points two weeks ago and 1.72 points at the start of the year. The Fed is set to keep rates at their 23-year-high at its meeting this week. Fed chairman Jay Powell conceded this month that US inflation was “taking longer than expected” to hit its target, signaling that borrowing costs would need to stay high for longer than previously thought. Despite the market’s expectations that high US borrowing costs will limit their freedom of maneuver, top European central bankers insist their less serious inflation problem requires a different response. Banque de France governor François Villeroy de Galhau expects continued cutting “at a pragmatic pace” after June. However, Austria’s central bank head Robert Holzmann warned: “I would find it difficult if we move too far away from the Fed.”
The skepticism surrounding the Fed's rate-cutting plans is also highlighted in a newsletter from Bloomberg [916801b5]. The article explores Elon Musk's rare show of contrition and what happens when trading in an old iPhone. It adds to the growing doubts about the likelihood of rapid interest rate cuts in the US this year. The uncertainty is expected to impact global share and cryptocurrency markets. However, billionaire Mike Novogratz remains optimistic about the potential for Bitcoin and precious metals to surge in value due to potential interest rate cuts [57e0acea] [916801b5].
Billionaire Mike Novogratz, founder and CEO of Galaxy Digital, believes that Bitcoin and precious metals like gold and silver are poised for a surge fueled by potential interest rate cuts. He criticizes U.S. fiscal policy and calls for significant spending cuts. Novogratz anticipates the Federal Reserve to proceed with rate cuts despite the lack of solid reasons for doing so. He believes this is a great setup for BTC, gold, silver, and copper, but not for the USA. Novogratz warns of the social risks of rapid wealth accumulation in cryptocurrencies and the potential for societal strife. His perspectives on potential Federal Reserve actions and their implications for economic and societal dynamics will likely stimulate deep discussions among experts [b55f8b3b].
Mark Spitznagel, chief investment officer and founder of Universa, a $16 billion hedge fund, warns that a shift to lower interest rates by the Federal Reserve will signal a dramatic market crash. Spitznagel argues that interest rate cuts will only occur when economic conditions deteriorate and the economy is turning into a recession. He believes that higher interest rates will eventually burst the 'greatest credit bubble in human history' and that the excesses built up since the 2008 global financial crisis have not yet been squeezed out of the economy. Spitznagel advises investors to take advantage of the current 'goldilocks' environment before the market crash occurs [b05c2ada].
Despite the fading hopes for rate cuts, Wells Fargo's Harvey believes there are plenty of tailwinds to support stocks, as mentioned in a newsletter from Bloomberg [7f877afb]. The uncertainty surrounding the Fed's rate-cutting plans is expected to have an impact on global share and cryptocurrency markets. However, billionaire Mike Novogratz remains optimistic about the potential for Bitcoin and precious metals to surge in value due to potential interest rate cuts [57e0acea] [916801b5].
The CEO of deVere Group, Nigel Green, warns that there may be no US interest rate cuts by the Federal Reserve until 2025. This comes as the core PCE price index rises to 2.7%, above expectations of 2.6%. Green states that the high interest rates being used to combat inflation have not been effective, and the Fed will need several consecutive months of evidence showing inflation heading back to the 2% target before they consider cutting rates. Previously, deVere Group predicted one rate cut in the third quarter of this year, but now believes there is a considerable risk that rates will not be cut until 2025. Green advises investors to consider reallocating their portfolios to sectors that perform well in a rising interest rate environment, such as financials, industrials, and materials. He also suggests diversification and investing in bonds with shorter durations to mitigate the impact of interest rate fluctuations [e87fd3d5].
Bitmex Founder Arthur Hayes advises investors to 'go long on Bitcoin' as G7 central banks may slash rates. Hayes believes that the current economic uncertainty and potential rate cuts by central banks will drive investors towards Bitcoin. He suggests that Bitcoin is a hedge against traditional financial markets and recommends investors to allocate a small portion of their portfolio to Bitcoin. Hayes also highlights the importance of understanding the risks associated with investing in Bitcoin [86f4dce2].
The potential impact of interest rate cuts on the price of Bitcoin is discussed in an article from Kitco NEWS [e846dd67]. The article highlights that falling interest rates could push investors towards riskier assets like Bitcoin, while a rate hike would put pressure on risk assets. However, experts note that Bitcoin's price drivers are its accessibility, portability, transparency, and responsiveness to global markets, rather than short-term rate changes. The article also mentions the potential impact of rising levels of debt and the depreciation of the U.S. dollar on Bitcoin's price. Overall, while interest rates are a contributing factor to Bitcoin's price movements, they are not the main driver, and other factors such as adoption, technological progress, and geopolitical risk play a significant role [e846dd67].
The cryptocurrency world has shown signs of recovery after a brutal crypto winter. Many digital currencies have reached or are approaching record highs. Central banks around the world have started to cut interest rates, which could have huge implications for cryptocurrency markets. The European Central Bank (ECB), the central banks of Canada, Switzerland, and Sweden have reduced their benchmark interest rates. The US Federal Reserve has not taken any action yet. Interest rate cuts by central banks inject fresh money into the economy and could lead to a potential boom in cryptocurrencies. Bitcoin price jumped from $7,000 to nearly $69,000 in 2020 when central banks cut interest rates. The round of interest rate cuts is expected to be largely favorable for the crypto markets. Bitcoin price dropped below $66,000 recently. The final approval of spot Ethereum ETF applications is expected soon. Europe's biggest telecom company plans to start mining Bitcoin. TON was the best performing cryptocurrency last week. The price of Bitcoin could crash to $40,000. Bitcoin ETFs recorded the third largest daily capital inflow [144cce2b].
Increases in U.S. interest rates can lead to adverse effects on emerging market economies, including those in Africa. Rate hikes resulting from hawkish Federal Reserve policy or inflationary pressures can lead to capital outflows and currency depreciation. As a result, many individuals and businesses in Africa turn to cryptocurrencies to mitigate the impact of these shocks. Africa received $117.1 billion in on-chain crypto transactions between July 2022 and June 2023. Bitcoin is dominant in Africa, with residents using it as an alternative store of value. Stablecoins have also gained popularity due to their lower price volatility. Nigeria stands out as Africa's top crypto economy, with a growing desire for diversification between Bitcoin and stablecoins. Nigerian citizens have resisted the implementation of a central bank digital currency (CBDC) and prefer cash. The economic pressures resulting from the Fed's higher interest rates are likely to continue influencing public sentiment towards financial instruments, including CBDCs. Cryptocurrencies are transforming remittance flows and cross-border transactions in Africa. Africa's crypto adoption reflects the adaptability and resilience of African economies and the transformative potential of cryptocurrencies in emerging market economies. [66ae244c]