Crypto investors’ eyes are on the US Federal Reserve, which is about to make critical decisions regarding interest rates. The FOMC meetings regarding rate fixation were held on May 6th and 7th. Chairperson Jerome Powell is receiving pleas to keep the rates unchanged.
If he hears the pleas, the rates will remain between 4.25 and 4.5%. However, the US president is pestering for a rate cut, so that’s another concern that needs to be addressed now.
What Does The April Jobs Report Say?
According to the April Job Payrolls report, there has been a staggering increment of 1,77,000. Hence, Powell’s stance is probably going to be strengthened.
The labor market, meanwhile, remains resilient as ever, which suggests that the interest rate may remain intact.
How do Interest Rates Affect Crypto?
The Federal Reserve sets interest rates through the Benchmark federal Funds Rate, which will determine the borrowing cost now. Lower rates imply cheaper borrowing, improving market liquidity.
In other words, investors and businesses will acquire debt from the market to make investments. However, such events often hike asset prices, including crypto prices. In the meantime, investors scan the market for higher returns from riskier assets.
On the other hand, the stricter rates might impose more clauses on credit conditions. Hence, investors might be inclined towards safer investment options with standard interest rates, like bonds.
If that happens, it could mean major losses from the crypto market and set off liquidation drives, too. There is also a clear indication in that direction. As the two-day summit meeting started, US stocks fell. So, it’s right that investors are keeping a close eye on how Trump’s tariff decisions affect the Fed’s interest rates.
