The financial world is abuzz with a fresh wave of economic uncertainty. The prediction market platform Kalshi recently revealed a striking 29% probability of zero Fed rate cuts this year.
What is the Kalshi Prediction and What Are the Odds of No Fed Rate Cuts?
Kalshi is a U.S.-regulated prediction market where individuals can trade on the outcome of future events. Kalshi’s data shows that the probability of no Fed rate cuts in 2023 has risen to 29%, significantly higher than earlier expectations that included at least two cuts.
Reasons for Traders Doubting Fed Rate Cuts
Traders' skepticism is driven by persistent inflationary pressures. For instance, core PCE inflation, the Fed's preferred measure, shows no significant improvement. Factors such as high services inflation, a robust labor market, and supply chain issues are keeping regulators cautious.
How Uncertainty Over Fed Rate Cuts Impacts Crypto
The cryptocurrency market, sensitive to changes in monetary policy, may face challenges in a high-rate environment. High rates mean higher borrowing costs, which could decrease liquidity and demand for riskier assets like cryptocurrencies.
The Kalshi prediction underscores a critical shift in market expectations. Stubborn inflation presents the Fed with the challenge of balancing price control and economic growth, which may lead to changes in investor strategies, particularly in the crypto space.
