Fed Interest Rate Decision on May 7: What It Means for the Crypto Market

With the next U.S. Federal Reserve meeting just around the corner on May 7, traders and analysts seem to agree on one thing: there’s almost no chance of a rate hike or cut this time. But that doesn’t mean the market is calm, far from it. 

All eyes are now on what Jerome Powell Jerome Powell   Jerome Powell is a U.S.-based fintech specialist and the current head of the U.S. Federal Reserve. He was named the 2020 Forbes Person of the Year in Crypto award as a result of the high price gains in cryptocurrencies.   He has neither supported nor downvoted the concept of cryptocurrency adoption in the country. However, his expertise mainly talks about formulating fair and friendly crypto polices in the country.   Quick Facts   Full name Jerome Hayden "Jay" Powell Birth 04-02-1953, Washington, D.C., United States Nationality American Education Georgetown University Law Center Known for Banking Expert   Jerome Powell - Career Highlights & Events   2018: He was designated head of the Federal Reserve.   2021: Stressed the need for strict regulation while acknowledging the potential of stablecoins.   2022: Research on the economic impact of U.S. CBDC was initiated.     Finance will say during the press conference, and how the economy performs heading into June.

May: No Change Expected

Polymarekt, a prediction market, predicts that there’s a 98% chance the Fed won’t change rates at its May meeting. On the other hand, another possibility is that there is a 2% chance of a 25 bps drop being seen in May. 

With inflation cooling slowly, but it’s still above the Fed’s 2% target. While the rates are already at 5.25% to 5.50%, the highest in over two decades, the central bank seems content to wait and watch.

But while a “pause” in May is nearly guaranteed, markets are not just looking at what the Fed does, they’re listening closely to what Fed Chair Jerome Powell says.

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June: A Turning Point?

June is where things get interesting, with the possibility that the 72% chance the Fed won’t change rates at its June meeting. Further market odds suggest about a 25% chance of a rate cut, and that number could rise if job growth slows or inflation drops further. 

This makes upcoming reports on inflation and jobs critical. A weak job report or softer consumer price data could tip the balance toward a rate cut. 

On the other hand, if inflation stays sticky, the Fed might stick to its current stance or even start talking about keeping rates high for longer.

Powell’s Tone Matters More Than Ever

Interestingly, the market may react more to what Fed Chair Jerome Powell says than to what the Fed does. If he talks too tough, using phrases like “persistent inflation” or “not enough progress,” markets could sell off sharply. 

Tech stocks and rate-sensitive sectors might drop, bond yields could rise fast, the U.S. dollar might gain strength, and assets like Bitcoin or gold could lose steam.

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