Federal Reserve Chair Jerome Powell signalled that more rate cuts are likely coming, as the labor market softens
Summary
- Slowdown in the jobs market suggests more rate cuts required, Fed Chair Powell stated
- Price increases reflect tariff costs, not the underlying inflationary pressure
- Bitcoin fell 3% ahead of Powell’s speech, as Fed policy directly impacts crypto market prices
The Fed will likely cut rates again, as a weak labor market shows signs of concern. On Tuesday, October 14, Federal Reserve Chair Jerome Powell spoke at the National Association for Business Economics about the economic outlook and monetary policy for the U.S.
In his speech, Powell signalled that while some economic data is unavailable due to the market shutdown, the Fed still has access to data from both private and public sources. So far, this data indicates that the macro outlook for jobs and inflation did not change that much.
“While the unemployment rate remained low through August, payroll gains have slowed sharply, likely in part due to a decline in labour force growth due to lower immigration and labour force participation,” Powell said.
In this context, Powell sees that the risk to the labor market is rising. At the same time, inflation expectations remain within the Fed’s target of 2%. He also noted that increases in goods prices reflect tariff costs, and not underlying inflationary pressures. For this reason, he expects that the Fed will continue with rate cuts.
Bitcoin falls 3% ahead of Powell’s speech
For the crypto markets, the Fed’s policy is key, as asset prices are directly tied to monetary policy. Bitcoin (BTC) dropped 3% ahead of Powell’s speech, trading at around $113,100. Notably, traders expected a more hawkish shift on inflation due to the ongoing U.S.-China trade tensions.
Most institutional traders still view Bitcoin and especially altcoins as high-risk, high-growth assets. For this reason, like with other risk assets, low interest rates inflate crypto values, while high interest rates deflate them, by moving liquidity toward dollar-denominated, fixed-income assets like treasuries.
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