Bitcoin Holds Near $107,000 Amid Fed Rate Cut Speculation

Bitcoin (BTC) is currently trading just under $107,000, exhibiting a sideways movement that could be a precursor to significant market shifts. Over the past 24 hours, various economic indicators and statements from Federal Reserve officials have notably altered interest rate expectations. With major tariff deals on the horizon and inflation data surprising analysts, global markets, including the crypto space, are on high alert.

The Personal Consumption Expenditures (PCE) data released today indicated a weaker-than-expected rise in consumer spending. Core PCE, the Fed’s preferred inflation gauge, rose by 0.2% month-over-month and 2.7% annually, aligning with forecasts but suggesting a cooling trend in price pressures. Personal income growth missed expectations, while consumer spending unexpectedly declined. Despite the burden of 10% to 20% tariffs across several economies, their feared inflationary impact has yet to materialize. This weakens the Fed’s argument that lingering inflation is still being stoked by tariffs, leading markets to interpret this as a green light for earlier-than-expected monetary easing.

In the past 24 hours, three Federal Reserve officials suggested that a rate cut in July is possible, provided inflation doesn’t unexpectedly spike. Among them, Fed Governor Christopher Waller emphasized that slowing job creation could justify a policy shift even sooner. This is significant because, unlike previous meetings where the Fed’s decisions were nearly unanimous, future rate cuts may be decided by majority vote. This signals internal divergence within the FOMC and raises the probability of earlier easing. Market expectations now price in three rate cuts by the end of 2025, with the probability of a September cut surging to nearly 90%. Attention is turning to the July 9 tariff deal announcements that could further reduce inflation uncertainty.

Donald Trump and the U.S. Commerce Secretary have confirmed that multiple international tariff agreements are in final negotiation stages. These deals are expected to be revealed before July 9, which is now only 33 days away from the next Fed meeting. If the agreements effectively reduce trade tensions without adding to inflation pressures, the Fed could act swiftly. In parallel, the European Union is reviewing the U.S. offer and preparing countermeasures, just in case talks fail. However, hopes are high for breakthroughs that will restore stability to global markets.

Next week will be pivotal. If countries begin announcing finalized tariff agreements and economic data continues to ease concerns, the Fed could kickstart a series of rate cuts. These events are expected to have significant implications across asset classes—from traditional markets to Bitcoin. BTC has shown restraint, not following the S&P 500’s record-setting rally this week. However, according to analysts, this could be a strategic pause before a major breakout aligned with monetary easing. With $15 billion in options expiry today and weekend volatility on deck, a sharp move could be imminent.

Financial markets are currently anticipating that the Federal Reserve, led by Chair Jerome Powell, will maintain its patient approach regarding interest rate cuts, assigning a 22% probability to a rate reduction in the near term. This stance is supported by recent economic indicators, including inflation data that has exceeded target levels and a robust labor market. The Fed's reluctance to cut rates is further underscored by the One Big Beautiful Bill Act, which is set to provide additional fiscal stimulus, potentially fueling inflationary pressures.

Neel Kashkari, a prominent Fed official, has expressed his expectation for two rate cuts this year, with a possible first cut in September. However, this outlook is contingent on further economic data and the evolving inflation landscape. Kashkari's stance contrasts with the broader consensus within the Federal Open Market Committee (FOMC), which has maintained a signal of two rate cuts in its Summary of Economic Projections. This divergence highlights the internal debate within the Fed regarding the appropriate timing and magnitude of rate adjustments.

Recent inflation data, particularly the Personal Consumption Expenditures (PCE) index, has shown a hotter-than-expected reading of 2.7%, which has pressured the Fed to delay rate cuts. This data, coupled with a 0.4% decline in personal income and a slowdown in consumer spending, has forced traders to recalibrate their expectations for easing monetary policy. The Fed's preferred inflation gauge, the PCE index, has remained sticky, contributing to the central bank's cautious approach.

The economic landscape is further complicated by the potential for additional fiscal stimulus, which could exacerbate inflationary pressures. The Fed's reluctance to cut rates is also influenced by the need to balance economic growth with inflation control. While some policymakers, including Susan Collins, have expressed openness to rate cuts, the majority of the FOMC remains hesitant, awaiting more conclusive data.

In summary, the Fed's decision on interest rate cuts is influenced by a complex interplay of economic indicators, fiscal policy, and internal debates. The central bank's patient approach, supported by recent inflation data and a robust labor market, suggests that rate cuts are unlikely in the near term. However, the possibility of two rate cuts later this year, as suggested by Kashkari, remains on the table, contingent on further economic developments.