Bank of America announced that it no longer expects the Federal Reserve to cut interest rates this year, citing stronger-than-expected job market data in the United States. This development has sent ripples through the crypto sector, which has historically been highly sensitive to monetary policy changes in recent years.
JUST IN: ???????? Bank of America says it no longer expects the Federal Reserve to cut interest rates this year.
— Watcher.Guru (@WatcherGuru) January 10, 2025
The Federal Reserve previously cut interest rates in September for the first time in over four years, aiming to counter signs of a weakening jobs market. That decision boosted hopes for lower borrowing costs, especially after a period of historically high rates. However, those hopes have faded with recent data indicating resilience in the job market.
Interest rates on U.S. 10-year and 30-year government debt jumped after the report, with the 30-year bond yield surpassing 5%- a figure not seen in decades. Higher yields typically discourage risk-on investments like crypto, prompting concerns about liquidity tightening in the upcoming months. Still, for now, the Fed’s hawkish tone means the crypto market is unlikely to see a major relief rally anytime soon.
Crypto investors, who were banking on a dovish Fed to intensify another bull run, may need to recalibrate their expectations. The Bitcoin market is seen as a hedge against inflation. It could face headwinds if interest rates remain elevated, making traditional fixed-income assets more attractive.
Morgan Stanley’s chief economic strategist, Ellen Zentner, echoed this sentiment, noting that even if inflation cools in the coming months, the Fed is unlikely to lower rates given the strong job market. “This jobs data effectively removes that immediate pressure on the Fed to cut rates,” she said.
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