The Fed will likely choose to raise rates modestly – if at all.
Cryptocurrencies and stocks rose on Friday after data was released showing US inflation slowing in February.
Bitcoin and ether rose more than 2% after U.S. inflation rose more slowly than expected, suggesting the Federal Reserve may slow the pace of rate hikes. .
Cryptocurrencies rise on expectations that the Federal Reserve may delay raising interest rates. Lower interest rates make borrowing cheaper, which means more funds are available to purchase risky assets. Digital assets have rebounded this year from the worst bear market since 2019, in part due to growing speculation that hawkish US monetary policy to combat inflation is finally bearing fruit.
cooling of inflation
The Commerce Department said Friday that the personal consumption expenditure price index, which excludes volatile food and energy prices, rose three-tenths of a percent from the previous month and 4.6% from a year earlier.
The measure tracks “the widest range of goods and services,” according to the Fed's San Francisco office, and is often referred to as the Fed's preferred inflation measure.
According to crypto investment firm GCR, the Core PCE Price Index numbers were better than expected. And it shows that U.S. inflation has slowed since January, when it rose six-tenths of a percent from the previous month and 4.7% from a year earlier.
banking crisis
On top of the banking crisis caused by the Fed's aggressive rate hikes, this data solidified investors' expectations that if the Fed chooses to raise rates, it will do so modestly at its next meeting on May 2nd. .
A week ago, on the heels of rival UBS's emergency takeover of Credit Suisse, and just a week after the failures of Silicon Valley Bank, Silver Gate Bank and Signature Bank, investors expected the Fed to keep interest rates on hold at its May 2 meeting. It is said that he was betting on Connect to the CME FedWatch tool.
But fears of a broader banking crisis have receded somewhat, and the probability of a modest rate hike has spiked earlier in the week. That idea solidified after Friday's release of inflation data. Investors currently believe that the odds of no rate hike and the odds of a 25 basis point (bp) hike are roughly even.
Even odds of no rate hike and 25bp increase. Source: Federal Watch.
the biggest mover
Stocks soared Friday, with the S&P 500 and Nasdaq up about 1.3% and 1.6%, respectively.
In the crypto market, Friday's big winners included liquid staking protocol Lido, as well as Ethereum competitors Cardano and Fantom, each of which grew more than 6% from the previous day.
Meanwhile, Binance’s BNB token was flat. Investors fled the token on Monday after the Commodity Futures Trading Commission sued Binance for allowing Americans to use its international platform.
Market ignores CFTC lawsuit against Binance
Binance TVL and token declines have barely outpaced the broader cryptocurrency market.
