Possible Pick for Fed Chair Could Rock Crypto Market

In a move that could send ripples across the cryptocurrency landscape, the Federal Reserve is mulling over appointing a new leader aligned with policies from the Trump administration. Anticipated to be revealed in January, Christopher Waller has emerged as a significant contender. His recent statements following the Federal Reserve’s interest rate verdict have sparked curiosity as Bitcoin is battling to break the $88,000 threshold.

Who Are the Leading Contenders?

Waller, appointed during Trump’s presidency in 2020, remains a relevant figure as he is considered one of the top five candidates to succeed Jerome Powell. Of importance is the divide among the 19-member committee, where seven members favor keeping interest rates steady next year. Contrary, figures like Miran, Williams, and Waller have advocated for swift rate cuts due to potential adverse effects on employment.

What Are Waller’s Main Concerns?

Waller has expressed significant concerns about the current state of the labor market. Despite the Fed’s efforts through interest rate reductions to bolster employment, wage growth and inflation remain below expectations. He acknowledges that the near-stagnant U.S. job market could see improvement by 2026, given enhancements in productivity.

Waller is confident that inflation is around 2% without additional spikes. Based on labor market signals, he suggests that the Federal Reserve should sustain its rate cuts but at a deliberate pace, avoiding drastic adjustments. Currently, its rates are 50 to 100 basis points above the neutral level, which Waller expects to stabilize inflation soon. He notes customs duties as a persistent challenge affecting labor market growth.

The possibility of future rate cuts remains if inflation expectations decline. Given the situation, there is no immediate rush for rate reductions. New asset acquisitions by the Federal Reserve don’t provide much-needed stimulus, allowing for gradual rate decreases. The Fed aims to manage this balance, ensuring inflation remains in check.

Though Waller dismisses tariffs as a long-standing inflation source, the outcomes of Court decisions on tariffs are still unpredictable regarding Fed policy. He highlights the importance of contemplating rate cuts but remains uncertain about the level of support the Fed will provide.

With 42 days to the next interest rate decision, there seems to be a 75.6% probability that current rates will remain unchanged.

“Interest rate cuts are in consideration, but their extent will depend on upcoming economic cues and evolving market conditions.”