Citi Shifts Fed Rate Cut Forecast to March Start

Citigroup revises its forecast for Federal Reserve rate cuts to occur in March, July, and September 2023, affecting Bitcoin (BTC) and Ethereum (ETH) market dynamics.

Delaying rate cuts shifts market conditions, impacting risk assets like BTC and ETH, fostering strategic investment outlooks despite unchanged easing expectations.

Citi Shifts Fed Rate Cut Forecast to March Start

Citigroup’s revised expectation entails interest rate reductions by 25 basis points in March instead of the initially expected January start. This adjustment offers a subtle delay in the anticipated monetary easing that influences the broader market narrative. The Federal Reserve’s decisions on interest rates can develop significant impacts on both traditional and digital assets.

Market analysts suggest these changes could temporarily sustain tighter monetary conditions. A sustained cutting cycle may provide substantial support for risk assets like cryptocurrencies, which generally perform well with increased liquidity. “Citi maintains a forecast of multiple rate cuts in 2024, yet the timing of these cuts has been adjusted, indicating tighter conditions earlier in the year,” according to Andrew Hollenhorst, US Chief Economist at Citigroup.

The immediate reaction from the crypto community has been varied. Traders and analysts focus on market futures and how this may align with or diverge from broader market pricing. No direct statements from major cryptocurrency influencers have indicated any precise market or price shifts regarding this call by Citi.

Potential Impact on Crypto Market Dynamics

Did you know? In past cycles, when major financial institutions aligned forecasts with multi-rate cuts, risk assets often benefited once actual rate cuts initiated.

CoinMarketCap indicates Bitcoin (BTC) is trading at $91,255.97, with a market cap of $1.82 trillion. The cryptocurrency has experienced slight fluctuations, up 0.99% over the last 24 hours, while reflecting a 13.14% drop over 60 days. Volume remains substantial despite a 7.98% decrease.

According to the Coincu research team, macroeconomic shifts like rate cuts can ease liquidity constraints, historically aiding speculation-driven assets such as BTC and ETH. This shift, however, may extend yield pressure on decentralized finance, indirectly impacting return prospects.

By analyzing previous trends and market conditions, it is evident that regulatory decisions play a critical role in determining the trajectory of digital assets, affecting both immediate and long-term market dynamics.