Bitcoin Little-Changed Above $57K as Fed Chair Powell Testifies to Congress

As a seasoned crypto investor with a keen eye on economic developments that could impact the digital asset market, I find Powell’s remarks both intriguing and concerning. The labor market showing signs of cooling down and the Fed’s acknowledgment of downside risks are certainly positive for the economy as a whole, but the persistent focus on inflation keeps me cautious.

On Tuesday, the likelihood of the Federal Reserve reducing interest rates in September grew slightly more probable following Jerome Powell’s remarks. The Fed chairman acknowledged that while inflation poses a risk to the economy, it isn’t the sole threat.

In my prepared remarks for the Senate committee during the Humphrey-Hawkins testimony, I expressed concern that if we ease policy restrictions too late or insufficiently, it could negatively impact economic growth and employment. During the subsequent Q&A session, I elaborated on this point by sharing that recent data indicate a noticeable slowdown in the labor market. Additionally, I acknowledged that the Federal Reserve is acutely mindful of potential risks that could lead to unfavorable outcomes.

The Fed chair’s remarks hinted at some flexibility regarding interest rates, but his emphasis on controlling inflation remained unwavering. He communicated to the committee that no adjustments to the federal funds rate are anticipated until there is stronger evidence that inflation is consistently trending towards the 2% target.

Based on CME FedWatch’s latest analysis, there is approximately a 75% probability of the Federal Reserve implementing one or more interest rate cuts during their September meeting. This percentage has slightly increased from 74% just yesterday, and represents a significant jump from the 50% likelihood predicted one month prior.

The anticipated June Consumer Price Index (CPI) report, set for release on Thursday, is expected to reveal a 0.1% increase in overall prices and a 0.2% rise in core prices (excluding food and energy). Year-over-year, the headline inflation rate is projected at 3.1%, while the core rate is forecasted at 3.4%. Any unexpected figure could significantly influence the probability of a September interest rate reduction.