US Federal Reserve officials backtrack from early rate cuts after Friday’s strong jobs report shows resiliency in the US economy. Federal Open Market Committee (FOMC) members Austan Goolsbee and Michelle Bowman are more reluctant to rate cuts in the first half of 2024.
Jobs Data Lowers Odds of Fed Rate Cut in May or June
US non-farm payrolls increased by 353K in January, rising the most in 12 months, above market expectations of 180K. The strong jobs report was hotter as compared to an upwardly revised 333K in December. The unemployment rate held steady at 3.7%. The Fed has kept interest rates unchanged for four consecutive times, and the jobs data clearly indicated that there is more room for Fed to delay rate cuts post-June.
Federal Reserve Bank of Chicago President Austan Goolsbee said he needs further proof the Fed is on track toward its 2% inflation goal before cutting interest rates. He rules out interest rate cuts in March, as hinted by Fed Chair Jerome Powell in the FOMC press conference.
“I don’t like tying our hands ahead of time when we’ve got weeks and months of data to come in. We ought to base those decisions on how the actual data come through. More and more progress like what we have seen on inflation and on jobs is what we need to see to feel comfort that we’re on target.”
In addition, Federal Reserve Governor Michelle Bowman expects inflation to cool further as the Fed keeping interest rates at their current level. She said it’s too soon for Fed officials to consider cutting rates, as per Reuters.
“In my view, we are not yet at that point,” said Bowman. “I will remain cautious in my approach to considering future changes in the stance of policy. Reducing our policy rate too soon could result in requiring further future policy rate increases to return inflation to 2% in the longer run.”
The US economic data are coming in hotter, including the last retail sales print, indicating the resiliency of the US economy. BlackRock expected the Fed can start rate cuts in June, earlier than the European Central Bank (ECB). The Fed hinted to cut rates by 75-100 basis points by the end of the year.
“We do expect the Fed to lower interest rates this year,” Truist managing director Chip Hughey says. “I just think they’re going to be very cautious and move very slowly.” pic.twitter.com/zhNGDmTYmw
— Yahoo Finance (@YahooFinance) February 2, 2024
Bitcoin Under Selling Pressure
While investors keep an eye on the Fed and Treasury Dept’s plan to prevent another banking crisis similar to last March as Bank Term Funding Program bailouts (BTFP) end in March, macro builds pressure on Bitcoin.
The US 10-year Treasury yield is back above 4% after the jobs report. Currently, US10Y is at 4.024% from 3.88% on Feb 2. Moreover, the US Dollar index (DXY) surged to 104 on Friday, the highest in seven weeks, as traders lose confidence about expected rate cuts by the Federal Reserve in March.
Bitcoin moves against Treasury yields and the US dollar. The macro could delay BTC price rally after the Bitcoin halving amid rising macro pressure.
BTC price holds above $43,000 after a 3% jump this week. The 24-hour low and high are $42,584 and $43,422, respectively. Furthermore, the trading volume has decreased by 20% in the last 24 hours, indicating a decline in interest among traders.
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