Disparity Between Cen Banks Puts Global Economy in Question

Crypto markets saw a different wave of decisions being taken by central banks across the world. As Investopedia reports, interest rates were lowered by the central banks in Switzerland and Mexico while remaining unchanged by the Bank of England and the U.S. Federal Reserve. Switzerland is experiencing reduced economic growth and inflation, while Mexico moved swiftly to contain rising costs. These disparities are now creating questions about where the global economy is headed.

Fed’s Three Interest Rate Cut View

Since December 2023, the market has priced in about three rate reductions for 2024 in the US. The first rate cut was however anticipated at the March meeting. But consistent signals from economic data and the Fed officials themselves sharply reduced expectations of the same. Parallel to this, the once-expected June rate drop has now been further delayed until September or later. The markets for cryptocurrencies may be impacted by this.

Will Disparities Keep US Behind the Curve?

Usually, central banks across the globe try to keep their rate decisions in line with a broader idea. This helps economic giants to be at par in terms of economic growth and stability. However, with different economic signs prevailing in various countries, it is possible that rate decisions might not get synchronized this time. This might not put the US behind the curve but will put pressure on its economy.

The Federal Reserve chairman, Jerome Powell, has previously expressed doubts about the imminence of a recession in the US economy. He did, however, note that it is challenging to forecast when the central bank may lower interest rates and support the current economy because of the uncertainties surrounding future inflationary developments.

How Will This Affect Crypto Markets?

In the past, while assessing assets, investors have placed a great deal of reliance on the Federal Reserve’s rate decisions. Government securities often lose value due to lower interest rates, which makes bitcoin and other cryptocurrency assets more appealing. Due to the Fed delaying rate reduction, investors may opt to hold onto traditional assets for the time being, which has prompted volatility in the cryptocurrency markets. Positively, though, a strong economy also maintains high levels of investor demand. Purchasing power is often constant in thriving economies, and riskier investments are preferred. In such a scenario, it is unlikely that the Fed’s decision will slow the present rate of growth in the cryptocurrency markets.

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