Crypto Market Rises on Cooling Inflation, But Labor Market Concerns Linger
The crypto market saw a brief rally following Thursday’s Consumer Price Index (CPI) report, which showed inflation cooling more than expected in June. Traders are hopeful that the Federal Reserve (Fed) might cut interest rates this year, which could be positive for risk assets like crypto.
However, the Fed might be more focused on the labor market, which is showing signs of weakness. The U.S. unemployment rate has increased for three consecutive months, reaching 4.1% in June. Some economists believe that a weakening labor market could be a bigger risk to the economy than inflation.
The Fed’s Dual Mandate
The Fed has a dual mandate: to keep prices stable and promote maximum employment. With inflation cooling and the labor market weakening, the Fed could be tempted to cut rates sooner than later. The odds of a rate cut in September have increased to nearly 95%, according to CME’s Fed Watch tool.
A Rate Cut Doesn’t Guarantee a Bull Market
Even if the Fed does cut rates, it might not be as bullish for crypto as some traders think. A weakening economy could lead investors to move money out of risk assets, like crypto, and into safer investments.
Stay Tuned
The crypto market is likely to remain volatile in the coming months as investors navigate the uncertain economic landscape. The Fed’s actions, the direction of inflation, and the health of the labor market will all play a role in shaping the crypto market’s future.
