updraftplus domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /home/aonyeani76/cryptocurrencypanther/wp-includes/functions.php on line 6131hustle domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /home/aonyeani76/cryptocurrencypanther/wp-includes/functions.php on line 6131wpforms-lite domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /home/aonyeani76/cryptocurrencypanther/wp-includes/functions.php on line 6131
Following the latest 25 bps increase to the federal funds rate Wednesday, which was widely anticipated ahead of time by the market, the most important interest rate in the economy is now a remarkable 525 bps above where it was prior to March 2022, when the Fed first hiked rates.
Finally, after a relentless liquidity squeeze, the market is anticipating that the end of the road may be nigh. For Bitcoin investors, this is music to their ears. Or at least that is what many in the sector are currently proclaiming. The only thing is, the true story may be a bit more convoluted.
Firstly, it is unquestioned that the transition to a higher yield environment has been a death wish for crypto. As inflation became rampant last year and we transitioned to a new paradigm of tight monetary policy after a decade of essentially-free money, digital assets were crushed. Liquidity was sucked out of the entire system, hurting assets which reside on the long end of the risk spectrum the most. And that is certainly where crypto has set up shop in its brief existence thus far.
The below chart shows this as well as any. Plotting the two-year treasury yield, which moves with rate expectations, on an inverted axis against the Bitcoin price shows how much the latter has dipped in line with the rise in yields. And we know that where Bitcoin goes, crypto tends to follow.
The optimism being spouted about now is centred on the hope that much-coveted rate cuts are imminent. Yet there is reason to believe that this may still be premature, for a number of reasons. The bulk of Powell’s comments from Wednesday’s meeting can be dismissed as diplomatic answers structured to leave the Fed with as much optionality as possible going forward, but one admission was notable: the revelation that the Fed is no longer forecasting a recession.
“So the staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession,” Powell said.
While this may sound like good news – and it is! – this also means that, perhaps counter-intuitively, Bitcoin may not have quite the boost behind it that it may have otherwise hoped for. The reason is that, if we go back to Economics 101, the Fed utilises rate cuts to stimulate a sluggish economy. If a recession is no longer anticipated, it is less likely these cuts will come.
The Federal Reserve has been extremely reluctant to cut rates in the last few decades unless explicitly forced to, such as when the economy went into a tailspin as the COVID pandemic suddenly emerged in March 2020. If we view the below chart, showing the fed rate all the way back to 1990, we see that without a recession, the administration has been cautious for the most part. And with inflation remaining higher than its 2% target, it feels ambitious to assume it will change that approach anytime soon.
While rate hikes may be coming to an end, rate cuts don’t feel like they will transpire anytime soon.
This thought is reinforced when digging into the numbers underlying this unique current macro situation. While the headline figure of 3% inflation is drawing all the attention, the core number is perhaps the better gauge; this strips out the volatile effects of food and energy and can be more relevant for the Fed’s policy decisions. Looking at this core number, it has dropped only 110 bps in the last year and remains at a stout 4.8%. This contrasts with a fall of 690 bps in the headline figure over the same period.
Not to mention that with the way the CPI is structured as a YoY number, we are into the stage of the year where inflation was always going to fall. This is because there were such hot readings landing at this time last year, when energy prices were sky-high and inflation came within 10 bps of hitting double digits. These readings dropping out of the index creates a more dramatic reduction in the YoY number.
While 3% may sound close to 2%, this difference also remains a chasm, should the Fed remain determined to get back to its original target. Jim Bianco, speaking to the On the Margin podcast this week, had a good way of explaining why this matters.
“The Fed would tell us that the neutral funds rate is half a percent above inflation…so if the long-run (inflation) rate is 3% (as opposed to 2%), the neutral rate is 3.5%, so they are 200 bps above that (at the current fed rate). When the yield curve normalises out again, it should be positive 150 bps – that is historically where it has been.
With a 150bps spread on the yield curve, he concludes that the 10-year yield must be at 5% to be neutral. Currently, the 10-year yield is at 3.9%, meaning via Bianco’s summation, rates would need to come up 110 bps to hit the Fed’s notion of neutrality under a 3% inflation target regime. This illustrates how the journey to 2% remains important, should that still be the Fed’s target (which Powell has adamantly repeated it is).
In addition to the inflation number, there is no getting around the fact that wage pressure remains high and unemployment is at 3.6%, hanging around the lowest mark in half a century. This, again, is great news for the overall economy, but will also spell concern in the Fed that inflationary pressure remains and the fight is not yet over. Cutting into this environment feels like a risk that Powell and co. are not in a position to take, and perhaps won’t be for longer than some anticipate.
With monetary policy operating with such a notorious lag, and the fact this hiking cycle has been among the swiftest in modern history, it needs to be caveated that, while the Fed is determined to keep all options open, there genuinely is a lot of uncertainty.
For crypto, this bears consideration amid the tangible excitement that has begun flowing through certain circles. Undoubtedly, this has been a tremendous run and the industry would have snapped your hand off if you offered them this position nine months ago, when FTX circled the drain and threatened to pull a chunk of the entire asset class down with it. But the battle has not quite been won yet, even if the tide has begun to turn.
Cryptocurrency prices reacted mildly to the latest interest rate decision by the Fed. Bitcoin remained stuck slightly below the important level at $30,000 even as the Dow Jones continued its remarkable comeback. The index has risen in the past 13 days for the first time since 1980s. Meanwhile, Chancer raised over $1 million from investors.
The Federal Reserve decided to hike interest rates by 0.25% in its July meeting in a bid to fight the stubbornly high inflation. This rate hike brought interest rates to between 5.25% and 5.50%, the highest level in more than two decades.
Financial assets like cryptocurrencies and stocks don’t love high-interest rates, which explains why most of them plunged in 2022. However, there is an increasing hope that the Fed is nearing the end of the hiking cycle.
That’s because of the recent economic data from the United States. Data published earlier this month showed that the American labor market softened in June this year even as the unemployment rate sits at a multi-decade low.
At the same time, consumer inflation numbers revealed that prices dropped to the lowest level since March 2020 in June. The headline consumer price index (CPI) stands at 3.0%, lower than 2021’s high of 9.1%. Therefore, the bank will likely maintain interest rates at this range in a bid to prevent a hard landing. In a note, a Morgan Stanley analyst said:
“Nothing in the policy statement or the press conference led me to doubt our view that this will be the last hike of the cycle. The consumer is slowing, jobs are slowing, inflation is slowing and all those big pieces of the economy have been coming in line with our expectations.”
Another analyst at Pantheon Macroeconomics said:
“Numbers like that will make it harder for the Fed to justify hiking again, provided the gentle but persistent downward trend in payroll growth continues.”
These statements are positive for cryptocurrencies, including Chancer. For starters, Chancer is an upcoming blockchain project that aims to change how the betting market works. It will achieve this using smart contracts, which are available in the blockchain technology.
In addition to traditional sports markets, the platform will make it possible for people to create their own markets. It will have internal features to ensure that these markets work well. For example, it will have live streaming features to ensure accuracy and active participation of the community.
Therefore, the hope that the Fed has delivered its final rate hike decision is a positive one for the market. For one, after the rate hike cycle ends, the next phase will be downwards, especially if the American economy continues slowing down. Buy the Chancer token here.
I believe that Chancer has some positives, which make it a viable investment. For one, from a macro perspective, the end of the hiking cycle is a positive thing for most assets.
At the same time, Chancer is disrupting an industry with millions of users and billions in annual revenues. Therefore, a small market share gain will mean that the company will do well.
Most importantly, Chancer is relying on the blockchain industry, which is borderless in nature. This means that the company will be able to onboard customers from around the world.
However, as with other token sales, there are always risks involved when investing in them. Therefore, you should be careful when buying the token. One way of doing this is by buying a small amount of tokens in order to mitigate risks. You can read the Chancer white paper here.
Buyers in the US may find houses cheaper as home prices are expected to fall when the Fed stops its current tightening cycle.
The Federal Reserve’s decisions on interest rates would likely affect US home prices, according to a Yale University professor of economics. Professor Robert Shiller said that although prices have rallied for a decade, the rally could end once the rate increases stop.
Shiller explained that the interest rate problem affects many people and not just those looking to sell homes. As these rates rise, everyone wants to take advantage and make the most out of the hikes:
“The fear of interest rate increases has influenced people’s thinking – it’s not just the homeowners, it’s new buyers who wanted to get in before the interest rates went up even more…They wanted to lock in. So that’s been a positive influence on the market. But it’s coming to an end.”
According to the S&P Shiller US National Home Price Index (CSUSHPINSA), prices have steadily risen since 2012. In May, data from the Black Knight Home Price Index showed that US home prices rose 0.7% from April. At a seasonally adjusted rate, the increase was a record high.
Furthermore, home prices in May were 0.1% higher than they were the year before. Black Knight’s vice president of enterprise research Andy Walden said the 0.7% month-over-month gain points to an annualized growth rate of 8.9%.
Interestingly, US home prices fell last summer as the average interest rates for the 30-year fixed-rate mortgage jumped over 100% in six months. The fall persisted until January when prices rose again as supply fell.
In early May, the Federal Reserve increased the interest rate by 25 basis points, the 10th consecutive hike in a little over a year. The decision pushed interest rates to the 5% – 5.25% range, the highest since August 2007. Following the increase, some Democratic lawmakers asked the Fed to suspend rate hikes for fears of job losses and a possible recession. As part of the statement announcing the hike, Fed Chairman Jerome Powell hinted that the regulator would suspend further hikes.
At the last meeting in June, the Fed did suspend hikes, stating that the suspension is necessary to “assess additional information and … implications for monetary policy.” However, a projection from the Federal Open Market Committee (FOMC) indicates nine members expect between 1 and 4 more interest rate hikes this year. Only two members believe there will be no more hikes until 2024.
Economists polled by Reuters say that the Fed will increase rates by 25 basis points at its next meeting on July 26, to a 5.25% – 5.50% range. However, most believe the upcoming hike would be the last of the current cycle.
According to Shiller, the increase in interest rates over the last few years has been “dramatic.” The professor believes that everyone feels it’s enough and a soft landing, however imperfect, is possible. However, Shiller says he’s not worried because the recent increase in home prices is likely seasonal, as these prices usually climb in the summer.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
As inflation slows, the European Central Bank (ECB) may halt future rate hikes, with the upcoming staff projections and rate decision playing a crucial role in determining the bank’s approach.
Central banks across the world have been hiking interest rates in order to tame the soaring inflation. However, as inflation shows signs of slowing down, the European Central Bank (ECB) could soon bring an end to future rate hikes.
The ECB is likely to increase its benchmark policy by an additional 25 basis points this week. However, it insists that all future rate hike decisions would be strictly data-dependent amid the current uncertainty with the future growth outlook and inflation.
In a research note to clients, Fritzi Köhler-Geib, a chief economist with German bank KfW, said:
“Weaker economic data, the significant easing on the energy markets and the recent surprisingly sharp drop in inflation argue for an early end to the interest rate cycle. On the other hand, growing wage pressure and falling but still high inflation expectations call for caution.”
Recent data on inflation indicates that prices are slowing down, but they are still increasing at a high rate for consumers. The headline inflation rate is at 6.1% year-on-year, and the core rate is at 5.3%. This level of inflation is concerning for officials in Frankfurt, especially with wages continuing to rise. Therefore, the upcoming staff projections from the ECB, which will be released on Thursday along with their rate decision, will be important in assessing the situation. In a research note, Mark Wall, an ECB watcher at Deutsche Bank, said:
“The risks [for the terminal benchmark rate] are tilted to the upside of 3.75%”. The bank’s benchmark rate is currently at 3.25%. “Inflation was below consensus in May but underlying inflation is still high and we expect upward momentum from tourism-related pricing in the summer. The ECB may have to wait until September and possibly later before it has robust evidence that underlying inflation is slowing enough to skip or pause the hiking cycle.”
As per the CNBC report, discussions around the quantitative tightening as well as an acceleration of shrinking ECB’s overall balance sheet will likely be out of the discussions between policymakers this week.
Last month in May, the policymakers also announced that they would stop reinvestments as part of their Asset Purchase Program (APP) from July 1. Started in mid-2014, APP is a bond-buying stimulus package that deals with persistently low inflation levels.
The top priority will be the direction of the economy and where it’s heading as the European Union slipped into a technical recession during the second quarter of this year. However, the growth picture has a lot of uncertainties into it. Although the sentiment has improved over the last six months, it’s yet to reflect on the hard data. In a research note, Natixis ECB watcher Dirk Schumacher said that “the lack of any clear sign of acceleration of the euro area economy could be explained by the fact that new clouds are rising at the horizon – just as the old ones have vanished. While companies report ‘equipment as a limiting factor’ being less of a problem in expanding production, a weakening of demand is increasingly seen as a problem.”
Read other market news on our website.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
The next Federal Reserve meeting slated to take place between March 21-22.
The world’s largest asset manager, BlackRock, has weighed in on the subject of interest rate hikes by the US federal reserve. According to BlackRock, upcoming federal reserve decisions are likely to see the rates increase by almost 6%. Per a CNBC report, the prediction follows a recent testimony by the Federal Reserve Chair, Jerome Powell. Speaking before the Senate Banking Committee on Tuesday, Powell warned that it is looking more likely that interest rates will go higher than the central bank initially projected.
Agreeing with Powell, BlackRock’s chief investment officer, Rick Rieder believes that more hikes remain the only way to manage the current state of the economy. He also sees the continued hike as the only way to reduce inflation to the barest minimum. Rieder wrote partly:
“We think there’s a reasonable chance that the Fed will have to bring the Fed Funds rate to 6%, and then keep it there for an extended period to slow the economy and get inflation down to near 2%.”
Rieder also noted that the present-day economy is more resilient than the federal reserve has ever had to deal with. He highlighted the fact that today’s economy no longer has a similar sensitivity to interest-rate hikes as it did some decades ago. Hence, the reason why the issue remains a tough one for the Fed to crack.
As expected, Powell’s recent commentary has drawn a lot of attention, and experts are expecting larger hikes. For example, just as BlackRock forecasts a terminal rate of 6%, Morgan Stanley economists also believe that Powell’s testimony will necessitate bigger hikes of at least, 50 basis points.
Last month, the central bank raised rates by 25 basis points to bring the rate to about 4.50% or thereabout. However, with high expectations of a 50 basis points hike, the rate will be somewhere in the range of 5% to 5.25%.
Therefore, anticipation is in full gear for the next Federal Reserve meeting slated to take place between March 21-22.
Mayowa is a crypto enthusiast/writer whose conversational character is quite evident in his style of writing. He strongly believes in the potential of digital assets and takes every opportunity to reiterate this.
He’s a reader, a researcher, an astute speaker, and also a budding entrepreneur.
Away from crypto however, Mayowa’s fancied distractions include soccer or discussing world politics.
(MENAFN)Elon Musk has one more time proved the capabilities of one tweet.
Mr Musk tweeted a text art picture of the adorable Japanese dog Shiba Inu/joke crypto currency with a rocket vessel, a word in the world of crypto meaning “to the moon”.
The image is employed when cryptocurrency costs are increasing over the diagrams.
His tweet definitely put the crypto on right road, it increased 21 percent following his move. The cost of Floki Inu surged distinctly as well.
At an earlier time in October, a post on Twitter by Tesla’s owner was accredited for fueling the coin.
It happens while Bitcoin get closer to its greatest charge till now.
Legal Disclaimer: MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.