Bitcoin Stable Amid Powell’s Testimony on Fed Rate Plans

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Bitcoin (BTC) remained relatively stable as Federal Reserve Chairman Jerome Powell testified before Senate lawmakers on July 9. During his appearance before the Senate Banking Committee, Rep. John Kennedy (R-LA) pressed Powell with the question, “So, when are you going to lower interest rates?” This query mirrored the broader sentiment among financial market participants who are eager for hints about the Fed’s upcoming decisions on monetary policy and interest rates. With Bitcoin’s price hovering near a five-month low, some investors hold hope that potential rate reductions could eventually bolster cryptocurrency values.

Powell, however, remained non-committal, stating, “Today, I’m not going to be sending any signals about the timing of future actions.” Lower interest rates could potentially weaken the dollar and support Bitcoin’s price, as the cryptocurrency is seen by some as an alternative monetary system. Zach Pandl, Head of Research at Grayscale, observed that Powell’s comments might be laying the groundwork for a future shift in monetary policy. During his remarks, Powell emphasized the Federal Reserve’s progress in reducing inflation but also warned about the risks associated with maintaining a tight monetary policy for an extended period.

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The Federal Reserve’s preferred measure indicated that last month’s year-over-year inflation rate was 2.7%. Powell reiterated that this rate is “still too high” and emphasized the need for ongoing vigilance until the Fed’s 2% inflation target is firmly within reach.

June’s employment data revealed that the U.S. economy added slightly more jobs than anticipated, although the unemployment rate rose to 4.1%, its highest level since October 2021. This data has bolstered traders’ expectations for forthcoming rate cuts. According to the CME FedWatch tool, there is a 71% probability that the Fed will implement an initial rate cut in September, with a total of two quarter-point reductions expected by the end of the year.

The Federal Reserve is currently juggling its dual mandate of promoting stable prices and maximizing employment. With signs of inflation easing and the 2% target appearing attainable, there is increasing scrutiny on labor market conditions. Powell recently mentioned that labor market conditions have returned to pre-pandemic levels, describing them as “relatively tight but not overheated.”