JP Morgan Withdraw Predictions for July Rate Cut. Effects on Crypto?

Wall Street giants, JP Morgan and Citibank have canceled or withdrawn their predictions of a cut in interest rates by the Federal Reserve in July following the release of jobs report on Friday, June 7.

Nick Timiraos, a journalist and Wall Street correspondent, said in a tweet, “JPM and Citi scrapped their calls for a July rate cut after last Friday’s jobs report. Most sell-side economists and other professional Fed watchers now anticipate one or two rate cuts this year in either September or December.”

JP Morgan Was Optimistic of a July Cut

JPMorgan economists had earlier predicted a July rate cut based on the April inflation report.  However, with the release of the jobs report which showed an unexpectedly strong job growth in May, the U.S. bank is expecting no rate cut until November.

Meanwhile, Citibank’s chief US economist, Andrew Hollenhorst, based the bank’s July Fed rate cut on softer labor market data and his team made a 140,000 nonfarm payroll increase prediction along with an estimated increase of unemployment rate from 3.9% to 4%. But the released jobs report also caused Citibank to scrap its prediction and expect a rate cut in September.

Regardless of the Wall Street giants’ predictions or the May jobs data report, the financial community is eagerly awaiting the next Federal Open Market Committee (FOMC) meeting scheduled for later this month.

The FOMC meeting, which is an assembly of the United States Federal Reserve to discuss and decide on the country’s monetary policies, will ultimately determine the potential for a July rate cut.

The Ripple Effect: How Fed Rate Cuts Influence the Crypto Space

The Federal Reserve interest rate has an inverse relationship with the value of cryptocurrencies. If the upcoming FOMC meeting results in favor of a July rate cut, the price of Bitcoin and other cryptos will rise as investors seek assets with higher risks and higher returns.

However, a rate cut omission by the FOMC will most likely lead to a crypto market correction as investors will opt for safe-haven assets like bonds. 

The crypto space remains susceptible to the influence of some of the decisions taken by government authorities. For instance, the likes of  Joe Biden’s veto to the House of Reps. appeal to disapprove the Securities and Exchange Commission’s Staff Accounting Bulletin 121 could lead to a decrease in crypto value.