Bitcoin (BTC) remained stable while Federal Reserve Chairman Jerome Powell testified before the Senate Banking Committee on July 9. Representative John Kennedy (R-LA) queried Powell on the potential for interest rate cuts, echoing widespread interest among financial markets in the Fed’s future monetary policy direction. With Bitcoin trading close to a five-month low, some investors are optimistic that rate cuts could bolster cryptocurrency prices.
Powell, however, refrained from signaling any imminent policy changes, stating, “Today, I’m not going to be sending any signals about the timing of future actions.” Lower interest rates could potentially weaken the dollar and support Bitcoin, which is viewed as an alternative monetary system. Zach Pandl, Head of Research at Grayscale, suggested that Powell’s remarks could lay the groundwork for a shift in monetary policy down the road. Powell acknowledged progress in taming inflation but cautioned against the risks of maintaining tight monetary policies for too long.
The Fed’s preferred inflation gauge indicated a 2.7% year-over-year rate last month, with Powell underscoring that this figure remains “still too high” and emphasizing the need for continued vigilance until the Fed achieves its 2% target.
June’s employment data showed the U.S. economy adding slightly more jobs than anticipated, though the unemployment rate edged up to 4.1%, its highest since October 2021. This has reinforced expectations among traders for upcoming rate cuts. According to CME FedWatch, there is a 71% probability of an initial rate cut in September, with two quarter-point cuts expected by year-end.
Balancing its dual mandate of price stability and maximum employment, the Fed is closely monitoring inflation trends as they approach their 2% target. Powell recently remarked that labor market conditions have returned to pre-pandemic levels, describing them as “relatively tight but not overheated.”
