Ethereum
Bitcoin, Ethereum Fall as Inflation Figures Reduce Hamstring Rate Hopes
Bitcoin and Ethereum fell slightly on Thursday, falling 1% each immediately after a key federal economic report indicated that the U.S. economy grew slower than expected in the first quarter.
The Bureau of Economic Analysis (BEA) said on Thursday that the country’s gross domestic product (GDP) grew at an annualized rate of 1.6% earlier this year, well below economists’ expectations for growth. by 2.2%. This slowdown follows six consecutive increases in GDP of more than 2% per quarter.
Weak exports and lower inventories offset a rise in residential construction and an increase in consumer spending, the report said. Thursday’s GDP weakness follows annualized growth of 3.4% at the end of last year.
Meanwhile, Bitcoin and Ethereum prices fell slightly over the past day to $64,690 and $3,160 respectively, according to data from CoinGecko. On Wall Street, the S&P 500 was also down nearly 1% as of this writing.
“The title [GDP] that number kind of gives a false signal,” said Sam Bullard, senior economist at Wells Fargo. Decrypt. “Leaving aside the volatile numbers, the underlying dynamics of the U.S. economy appear to continue to grow at a fairly rapid pace.”
For example, final sales to domestic private buyers increased 3.1% in the first quarter, Bullard said. By excluding changes in GDP from inventories, net exports and government, the measure better reflects the strength of the economy’s underlying domestic demand, it added.
However, the GDP report shows that core personal consumption expenditures (PCE), the Federal Reserve’s preferred inflation indicator, increased 3.7% in the first quarter. Up from 2% in the fourth quarter of 2023, this could influence the Fed’s path on rate cuts, Bullard said.
To tame a decades-long surge in inflation, the U.S. central bank raised interest rates to their highest level in 23 years and kept them there for months. While higher interest rates can slow a hot economy by increasing borrowing costs, they can also weigh on risky assets like stocks and cryptocurrencies, as assets like bonds or liquidity becomes more attractive.
Changing expectations for rate cuts, alongside high geopolitical tensions in the Middle East, have Risk assets took a beating this month, including Bitcoin. And on Thursday, expectations that the Fed would keep interest rates steady in May solidified at 90%, up from 83% the day before, according to the CME Group. FedWatch tool.
“Seeing a pick-up in [core PCE] is consistent with the prolonged resilience we are seeing in the U.S. economy on the demand side,” Bullard said. “That keeps the Fed on the sidelines in terms of the timing of that first rate cut.”
Edited by Ryan Ozawa.