Trade Tensions May Push Fed to Hike Rates, Impacting Crypto
Komal Sri-Kumar, head of Sri-Kumar Global Strategies, believes U.S.-china trade tensions could lead the Federal Reserve to increase interest rates. This move is typically bad for cryptocurrencies and other risky assets.
On CNBC’s “Power Lunch,” Sri-Kumar argued that rising inflation risks make a rate hike necessary. He doubts the trade war is close to ending, suggesting the Fed must stay cautious. This contrasts with growing expectations of rate cuts to boost the economy.
Crypto.news analyst Crispus Nyaga noted that historically, rate cuts are good for Bitcoin (BTC). Though, rate hikes could cause more friction with the white House, potentially pressuring Fed chair jerome Powell.
powell, with one year left in his term, has faced tension. Reports suggest the president considered firing him, though this threat was later retracted.
Sri-Kumar warns of more volatility due to geopolitical shifts and the Fed’s tricky inflation management.
He also points out that recent U.S.-China interactions show an uneven dynamic. The U.S. has reduced tariff threats without notable Chinese concessions. This weakens the U.S. negotiating position.
“That’s a poor negotiating strategy,” Sri-Kumar said. He notes that U.S. manufacturers remain uncertain about new or returning tariffs if talks fail.
While markets rally on positive White House comments, the uncertainty faced by companies has not disappeared.
