The Federal Reserve is about to be 'torn apart' by those politicians in Washington. When Powell went to Congress this time, it felt like he was rushing into a powder keg with a fire extinguisher!
Why do you say that? Let me explain slowly.
Caught in the middle, feeling the pressure!
Republicans: The former president's side is howling, complaining that interest rates are too high, wishing Powell would boldly cut them by 2% tomorrow as if it were free! The former president's team even publicly criticized Powell on X for having 'political bias,' calling for him to be dismissed. The pressure is intense.
Democrats: Do you think the Democrats are easy to talk to? Not at all! Tough characters like Sister Warren are also banging the table and calling for rate cuts! With pressure from both sides, Powell is stuck in the middle; just thinking about that feeling makes me cringe. I can almost picture his forced calm expression...
Fire in the backyard, and even his own people have 'dove' out!
The most critical part is that there's a 'split' within the Federal Reserve itself! Powell's two top aides—Governor Bowman and Waller (both nominated by the former president and possibly candidates for the next chair)—recently jumped out to say they could start cutting rates as early as July! Waller even said he wants to 'slowly start cutting.'
Goodness, this really ignited the market! The futures market has directly bet that the probability of a rate cut in July has skyrocketed to 23%, while the probability of action in September is an exaggerated 82%! Even Allianz's chief advisor El-Erian said: 'Politics has already seeped into the Federal Reserve's decision-making!' Powell wants everyone to align their steps? Difficult! I feel nervous just watching old Powell.
Rate cuts are not a cure-all; be careful of the backlash!
The 2% big rate cut that the former president wants? Experts at Cato Institute's Cady are pouring cold water on it: impossible and shouldn't happen! Why?
First, the effects may be counterproductive! For example: From September to December last year, the Federal Reserve cut rates by 1%, and what happened? US Treasury yields rose instead of falling! Why? Because the market felt that the rate cut was too aggressive in stimulating the economy, worrying about higher inflation and an overheated economy! You see, the Federal Reserve wants to cool things down, but the market feels like it’s about to catch fire. Isn’t this operation outrageous? We in the crypto circle understand this best; good news becomes bad, or over-expectation leads to backlash, this plot is all too familiar!
Second, the Federal Reserve's 'image' is about to collapse! Cady's plain words mean: The Federal Reserve's job is to manage prices (inflation) and employment, not to save money for the government! If they recklessly cut rates due to political pressure, it would be like self-sabotage. Who would still believe in its 'independence' then? Without independence, the market becomes even more chaotic! This logic is similar to how we look at project teams in crypto; if the team lacks principles and acts recklessly,
Honestly, it makes me slap my thigh! These politicians really don’t shy away from causing trouble! On one side, the former president is urgently calling for rate cuts to boost the economy, while others are also calling for cuts. But the Federal Reserve is caught in the middle, needing to withstand pressure while relying on economic data for sustenance. It’s even divided internally; this drama is more exciting than a soap opera! With the market's expectations so high right now, if Powell withstands the pressure in Congress this time, or implies that things aren’t progressing as quickly as everyone thinks, the market might just experience a 'knee-jerk reflex' crash, right? Just thinking about it is thrilling... In our crypto space, especially with Bitcoin and Ethereum, we are tightly bound to global liquidity. If this storm at the Federal Reserve goes awry, our pool of water will shake along with it!
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So, my friends! Every word Powell says in Congress over the next couple of days could stir up huge waves! Will he firmly uphold the Federal Reserve's 'chastity archway' against both parties, or will he be politically coerced into an early shift? What does this mean for the global market and our crypto space, blessing or curse? Hit follow, and let’s discuss your views in the comments! Tonight at 10 PM (when Powell starts speaking) and in the subsequent market response, let’s keep an eye on this 'Federal Reserve defense battle' and see how it unfolds! The storm has arrived, don’t fall behind!
