Federal Reserve Chairman Jerome Powell announced a probable interest rate cut at the Annual Meeting of the National Association for Business Economics in Philadelphia on Tuesday because of growing risks to employment. This has caused Bitcoin (BTC) to rise above $112,000 as people expected easier money policies.
Powell said in the meeting that the situation for jobs and rising prices has not changed much since the central bank’s September meeting. This means the Fed is likely to make another cut at its October meeting.
The chairman also said that the downside risks to employment “appear to have risen.” Powell noted that the previous cut made last month was also due to the weakening labor market.
Notably, the Bitcoin price went up during the Fed Chair’s speech as investors guessed that another rate cut was coming. Data from CoinMarketCap showed that BTC broke the $112,000 mark and was trading near $112,800.
Meanwhile, last week, BTC had dropped to $110,000 because of worries over a potential trade war between the U.S. and China. The news of the possible cut is good for Bitcoin because it could add more money and liquidity to the market. BTC had already reached a record high above $126,000 earlier in the month when traders first expected an October cut.
Moreover, Powell shared that the Fed may soon stop reducing its balance sheet size. He indicated a shift from tightening to a looser policy. Powell stated that they “may approach that point in the coming months where they stop the balance sheet runoff.”
This process is an essential and “arcane” part of monetary policy. The asset side of the Fed’s ledger mostly holds securities, including U.S. Treasury securities and government-guaranteed agency mortgage-backed securities.
The goal is to ensure adequate liquidity for the banking system, which Powell called the “safest and most liquid asset in the financial system.” The Fed’s overall objective is to set policy based on the economy and balance the risks.
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