US Treasury Secretary Warns Against Rate Cuts Amid War-Driven Inflation

The US economy is facing a difficult decision: whether to cut interest rates or risk validating higher prices.

US Treasury Secretary Scott Bessent has urged the Federal Reserve to hold off on rate cuts due to rising inflation caused by the Iran conflict, which is lifting fuel costs and complicating the inflation outlook.

The Fed's own March minutes highlight the tension between inflation risks and employment risks. Officials warned that higher oil prices could lift inflation in the near term, delay the return to 2%, and, if sustained, pass through into core prices.

This creates a challenging environment for Bitcoin, as its price relies on the Fed easing monetary policy in response to weakening growth and softening inflation.

The connection between rate expectations and crypto runs through three channels: the cost of capital, risk appetite, and the dollar and real yields.