"Jobs Slide Forces Fed Hand, Crypto Waits for Clarity"

The crypto market has entered a period of consolidation as investors await the outcome of the Federal Reserve’s upcoming interest rate decision in late September. Recent data showing a weaker-than-expected jobs report has increased the likelihood of a rate cut, pushing market expectations toward a near-certainty of monetary policy easing. As of now, the focus on the Fed’s next move has left cryptocurrency prices largely stagnant, with traders holding positions until more clarity is provided.

The U.S. labor market reported the addition of just 22,000 jobs in August, well below the anticipated 75,000 figure. This figure, along with downward revisions to previous months’ job gains, highlights a cooling labor market, which has strengthened the case for rate reductions. The unemployment rate edged up to 4.3% from 4.2%, further reinforcing concerns about economic momentum. These data points, which were released on Friday, are expected to influence the Fed’s next decision at its September 16-17 meeting. As a result, the probability of a rate cut has surged to 99% among investors, according to market indicators.

Federal Reserve Chair Jerome Powell had already signaled openness to rate cuts at the end of August, citing a shifting balance of risks in a speech at the Jackson Hole symposium. The latest employment data have only reinforced this stance. Analysts like Leslie Falconio of UBS Global Wealth Management have stated that a cut is now inevitable, though the debate centers on the size and tone of the adjustment. A 25-basis-point reduction is seen as the most probable option, though there is now a 14% market-implied probability of a more aggressive 50-basis-point cut.

The political pressure on the Fed has also intensified, with members of the Trump administration, including Labor Secretary Lori Chavez-DeRemer, publicly urging faster action. The White House has criticized Powell for delaying rate cuts, arguing that lower interest rates are essential to support economic growth and job creation. However, analysts caution that the Fed is likely to proceed cautiously, balancing inflation risks against the need to bolster the labor market.

Despite the uncertainty, the broader market has already priced in a near-certain rate cut, leading to a subdued response from crypto traders. With asset prices reflecting expectations, the market is now looking beyond September to the remaining policy meetings in 2024 and 2025. The coming weeks will be crucial for determining the tone of the Fed’s policy path and whether it signals further reductions in the coming year.

Source:

[1] Jobs slowdown seals Fed rate cut as White House criticizes Powell for not acting sooner (https://finance.yahoo.com/news/jobs-slowdown-seals-fed-rate-cut-as-white-house-criticizes-powell-for-not-acting-sooner-150805909.html)

[2] Fed Rate Cut Now Appears Certain After Weak Jobs Report (https://www.investopedia.com/job-report-seals-federal-reserve-interest-rate-cut-in-september-11804268)