Market Update: Bitcoin & Ethereum inflows Amid Shifting Fed Expectations
WASHINGTON – Cryptocurrency markets have seen $1.14 billion flow into Bitcoin and $1.14 billion into Ethereum as the start of the month,despite overall outflows totaling $2.3 billion. This activity coincides with growing anticipation of a potential shift in Federal reserve policy,fueled by dovish signals in the latest FOMC minutes and a weaker-than-expected July jobs report.While inflows remain positive at $1.8 billion, the Fed’s September decision hinges on upcoming economic data, particularly employment figures and core PCE inflation.
The shift in sentiment comes as markets grapple with conflicting economic signals. The FOMC minutes revealed internal divisions, with most members prioritizing the risk of persistent inflation over concerns about a slowing labor market. However, some officials expressed worries about employment, and dissenting voices like Christopher Waller and Michelle Bowman advocated for rate cuts citing weakening job data. Federal Reserve Chair Jerome Powell, who has remained largely silent since the disappointing July employment report, is expected to maintain versatility at the upcoming jackson Hole symposium, avoiding firm commitments regarding a September rate cut.
Minutes from July’s FOMC meeting highlighted that a majority of the 18 participants viewed upside risks to inflation as the greater threat,emphasizing that inflation remained above the 2% target for too long. Powell is likely to reiterate the uncertainty surrounding the economic outlook at Jackson Hole, despite market expectations for easing. He previously asserted that the labor market wasn’t weakening, a claim contradicted by recent negative revisions, raising even the possibility of a recession. The symposium’s theme, “Labor Markets in Transition,” will force Powell to address the issue, possibly focusing on the unemployment rate as a more reliable indicator than job creation numbers and acknowledging the role of immigration. Though, the lack of accelerating wage growth despite reported labor shortages presents a challenge to this narrative.
Analysts suggest expectations of a significant policy shift at Jackson Hole are likely overblown. With the August jobs report and PCE index still to be released before the September meeting, Powell is expected to remain deliberately ambiguous, potentially disappointing investors hoping for concrete announcements.
