Federal Reserve Interest Rates: Markets Say 84% Chance of June Cut

Key Takeaways

• Inflation in the US surged to 3.2% in March impacting the Fed’s rate-cut outlook.
• JPMorgan CEO Jamie Dimon advises the central bank to postpone interest rate cuts until after June.
• Markets are highly anticipating a rate cut in June with an 84% probability based on the Reuters poll.
• Bitcoin experienced a dip following US inflation data, signaling concerns over rate cut delay.

Analysts believe the United States Federal Reserve is at a critical juncture after releasing its March inflation data. With a recent unexpected rise in inflation to 3.2%, the central bank might face some pressure.

Industry voices like JPMorgan Chase CEO Jamie Dimon have suggested  a cautious approach. Meanwhile, Bitcoin’s rally continues despite the rate cut being delayed until the summer.

Inflation Dilemma and Rate Cut Anticipation

In March, US inflation saw a rise to 3.2%. The uptick was more than expected while the Federal Reserve confronts curbing inflationary pressures. The development has sparked discussion on the timing and magnitude of interest rate adjustments needed to stabilize the economy.

At a recent summit, Jamie Dimon emphasized the importance of the Federal Reserve acting based on economic data rather than precipitating interest rate cuts. He highlighted the potential risk to the Fed’s credibility in its mission to combat inflation and suggested postponing rate reductions beyond June.

A Reuters  poll currently indicates an 84% chance of a rate cut in June, with expectations leaning towards a total of 90 basis points reduction throughout the year.

Dimon also noted the robust state of the US economy, paradoxically hinting at the possibility of a recession or stagflation, thereby advocating for a measured approach to policy adjustments.

Similarly, Nathan Sheets, Global Chief Economist at Citi, anticipates the onset  of rate cuts in the middle of the year, suggesting a gradual cut. Wells Fargo also reportedly delayed its rate cut expectation from May to June.

Bitcoin Market Reaction

The financial markets, including cryptocurrencies like Bitcoin, have reacted to the inflation data. Based on CoinMarketCap analysis, Bitcoin saw a price fluctuation, dropping by 5% following the inflation announcement on March 12. However, it later recovered.

At the time of writing (March 13 2024), BTC continues to trade over the crucial level of $73,000. In the last year, Bitcoin’s value has gained over 200%.

Amid the price rise, a Bitcoin whale recently made around $217 million in profit from trading Bitcoin. According to , someone started buying Bitcoin on August 24, 2023 and made a series of transactions. Initially, they withdrew 8,500 Bitcoin and later deposited 4,300 Bitcoin back into Binance after the average price had risen to $43,534 per  Bitcoin.

Outlook Shifts to Summer

The Federal Reserve will try to strike a balance between curbing inflation and supporting economic growth. Now the outlook has shifted to June, with advice from financial leaders and market expectations playing a crucial role.

With an 84% market anticipation of a June rate cut, the Fed’s next move will also affect the Bitcoin market.

About the Author

Shraddha Sharma

Shraddha has around five years of experience as a financial journalist, focusing largely on the Asian markets. Starting her career in Mumbai, India, as a news trainee and producer, she quickly found her niche in crypto. She is keen on learning how emerging technologies affect the broader markets and enjoys explaining complex financial ideas in a way that's easy to understand.

See more

[email protected]