According to Reflexivity’s detailed analysis, the Bitcoin price remains strong despite the US economy struggling with inflation fears and slowed-down forecasts of Federal Reserve rate reductions. According to Reflexivity Research, the US CPI headline inflation is expected to reach accelerate Bank of America says that conditions do not appear to be favorable for the loosening of money policy. The forecast is 4.8% in 2024. Bitcoin and the crypto sector in general seem to remain optimistic despite this.
Bitcoin Unfazed By Delayed Rate Cuts?
In contrast to the previous forecast, which predicted six rate cuts by the Federal Reserve this year. CME FedWatch shows that a majority of participants in the market do not anticipate a cut before the FOMC’s mid-September meeting. The Fed has re-calibrated expectations about its ability to control persistent inflation.
Ritik Goyal is a guest in the midst of these macroeconomic changes. post Reflexivity Research presents an insightful analysis of the topic in its report entitled “The Fed is Unable to Cause a Recession. Risk Assets are Yet to Realize This.”
This report claims that contrary to popular belief, Federal Reserve’s interest rate increases had an unintended stimulus effect on the economy. Goyal details three distinct mechanisms by which this phenomenon works:
1. Increased Interest Rates on Government Bonds: “Rate hikes raised interest payments by the government to the private sector,” Goyal. The Fed’s rate hikes increase the burden of interest on government debt, since the federal government has taken out a lot of loans during this period. post-COVID period. The federal government’s debt to GDP ratio is now over 120%. Doubled interest payments are used as an effective stimulus. They channel approximately $1 trillion per year into the private sector.
2. Banks receive direct subsidiesThe Fed’s policies have led to redistribution within the economy. financial system. “Rate hikes raised the Fed’s direct subsidy to the banking system,” Goyal. The Fed has suffered losses due to the inversion of the yield curve, which directly benefits the banking industry. This amounts to approximately $150 billion in annual subsidies.
3. The Housing BoomRate hikes paradoxically have stimulated the real estate market. “Rate hikes induced a housing construction boom,” Goyal. Since higher interest rates deter existing homeowners from moving, new construction is the only option that can meet the housing demand. This sector has one of the largest GDP multipliers.
Goyal’s insight highlights a crucial misalignment of the Fed’s current approach The fiscal impact of pandemic has been substantial. “The traditional monetary policy framework is breaking down under the weight of fiscal dominance,” Goyal concludes by suggesting that the current environment could favour non-traditional assets such as Bitcoin.
Will Clemente, an expert in cryptography, has echoed Goyal’s conclusions. highlighted The broader implications for cryptocurrencies in X, formerly Twitter. “With debt/GDP as high as it is, we’re in a backwards world where high rates mean interest payments on debt are stimmy checks for people that buy assets—~$1T will be paid out in 2024. Big picture is very constructive for the internet coins.”
BTC was trading at $61,173 as of press time.
Chart from TradingView.com, image featured from Shutterstock
Disclaimer article This information is only for educational purposes. NewsBTC has no opinion about whether or not to purchase, sell or keep any particular investment. Naturally investing involves risks. It is recommended that you conduct your own research. own Do your research before you make any investments. You are solely responsible for the use of information on this site. own risk.
“This article is not financial advice.”
“Always do your own research before making any type of investment.”
“ItsDailyCrypto is not responsible for any activities you perform outside ItsDailyCrypto.”
Source: www.newsbtc.com
