If popular macroeconomist Bob Elliott is to be believed, there is a good chance that we will not see any interest rate cuts in 2024. Elliott believes that yesterday’s Core PCE inflation data – the US central bank’s preferred inflation gauge – makes it more likely that we won’t see rate cuts in 2024.
“3% is too high and there are now 4 months of data above the 2% target. In the best case we go to 2% in the coming months and then the Federal Reserve (US central bank) will need confirmation for a few months. There is not enough time for rate cuts in December,” said a clear Bob Elliott.
But what does that mean for Bitcoin? Will there be a “Part II” of the bull market?
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Opinions are strongly divided about American inflation
Funny enough, not everyone agrees with Bob Elliott’s lecture that too little progress is being made on inflation. Sonu Varghese, for example, is optimistic. He also shows that fewer and fewer parts of the PCE Price Index have an inflation rate of 4%+.
The number of categories for which there is deflation (falling prices) has also increased considerably compared to June 2022. In that respect, things are slowly moving in the right direction and we can probably hope for one or two interest rate cuts in 2024.
The market interest rate on 2-year US government bonds tells a clear story. It plunged after the announcement of the inflation figures. In principle, this indicates a market that expects interest rates to fall (faster).
Normally the market reacts positively to this. Now we saw Bitcoin first climb to $69,000 and then slide. The Nasdaq (blue) made a nearly identical slide to Bitcoin, while the S&P 500 (red) also struggled.
In that respect, that is not a good signal for the Bitcoin price, because in principle the data was fine and in one point even slightly better than expected. For that reason you would rather expect a price increase, which is what we initially saw.
Will we still get interest rate cuts in 2024?
It seems clear that “more evidence” that inflation is on its way to 2.0% is needed before interest rates can be lowered. In that respect, Bitcoin is still stuck with higher interest rates, at least in the United States.
The European Central Bank (ECB) appears to be making its first interest rate cut next week. But inflation in Europe also came in slightly higher than hoped this week, especially in the services sector.
This could also become a problem for the ECB, which means it will stick to the interest rate cut in June for the time being.
This is not the hoped-for environment for Bitcoin. The circumstances for the continuation of the bull market therefore do not immediately appear to exist. This requires economic data to weaken and inflation to fall.
We have started cautiously with this, but we are not there yet.
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Source: https://newsbit.nl/extreem-bearish-voor-bitcoin-toch-geen-renteverlagingen-in-2024/
