Analysts are expecting the Fed to pivot by March 2024 and begin the first rate cuts. Bitcoin and the crypto market are expected to rally in this scenario.
Bitcoin (BTC) has maintained its position with the price around the $35,000 mark for the past 24 hours, with some attributing this stability to the possibility of the Federal Reserve pausing its interest rate hikes. This was due to the latest US jobs data, which indicated a less robust job market performance.
The US Labor Department’s employment report revealed the addition of only about 150,000 new job positions in October. This followed a significant increase of approximately 297,000 in September.
Monday’s Bitfinex Alpha report suggested that the underwhelming jobs data further solidified the growing expectation that the Federal Reserve may halt its rate hikes. The report pointed out that the central bank’s decision to potentially pause rate increases was driven by the tightening of financial conditions, notably the rising bond yields in recent months.
Traders are now factoring in a 95% likelihood that the Fed will maintain interest rates in December, compared to the 80% probability before the release of the payroll data, as indicated by the CME FedWatch tool.
Bitfinex analysts also noted that the jobs data from Friday indicated a potential easing of wage-driven inflation pressures. The report stated that the slower job growth and higher productivity reported last week were in line with the Fed’s choice to temporarily halt interest rate hikes.
This development follows the Federal Open Market Committee’s decision last Wednesday to keep the benchmark federal funds rate within the current range of 5.25%-5.50.
Fed Takes a Cautious Approach, Pivot Soon?
In their report, the Bitfinex analysts wrote:
“The policy statement issued on Wednesday suggests that officials are taking a cautious approach, considering the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
A number of analysts are increasingly favoring the possibility of the first rate cuts occurring as early as March 2024. Should this scenario materialize, it could pave the way for a substantial surge in risk-on assets, including stocks and cryptocurrencies. Intriguingly, the next Bitcoin halving event shall align with this timeframe around April 2024, potentially providing additional momentum to the Bitcoin price rally.
Fed-fund futures are currently suggesting a 66.5% likelihood that the Federal Reserve will keep interest rates unchanged at the March meeting. Charlie Ripley, senior investment strategist for Allianz Investment Management said:
“Overall, the employment report could prove to signal a turning point in the US economy, but more importantly the data is a nod to the Fed as it shows monetary policy is working and should bring less debate on whether policy is sufficiently restrictive.”
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