Expectations of a Fed Slowdown Also Benefit Bitcoin
Equity and bond markets are not the only ones to benefit from the prospects of a slowdown in the Fed’s monetary tightening. The cryptocurrency market has also picked up since the start of the week, with Bitcoin even jumping more than 7% since Tuesday.
This speculation of a slowdown in monetary tightening by the Fed could continue over the next few sessions pending the next FOMC policy meeting next week. Nevertheless, Fed Chairman Jerome Powell could dampen this hope given the still extremely high inflation and the acceleration of underlying inflation.
Admittedly, the Fed should begin to slow down its monetary tightening in the coming months, but that was already announced by the FOMC in September. It is therefore not a real “pivot” for the Fed, since the central bank will continue to raise its rates to bring them as it plans to within a range of between 4.50 and 4.75% by the end. of the first quarter of 2023.
We would have a real “pivot” if the Fed decides to raise rates less than expected, which is unlikely as long as underlying inflation remains at 40-year highs and the unemployment rate remains at higher levels. historic lows.
The market rebound is therefore likely to be only temporary and limited, before another leg down as economic risks remain tilted to the downside with the global energy crisis, soaring funding costs and headwinds. of the Chinese economy to restart.