Trade war could force Fed to raise rates, hurting crypto

Komal Sri-Kumar, president of Sri-Kumar Global Strategies, warned that the current American-Chinese trade tensions could push the federal reserve towards interest rates hiking, a decision which is generally considered as a contrary wind for cryptocurrency and other risk assets.

Speaking on CNBC Power Lunch segment On Wednesday afternoon, Sri-Kumar said he thought that an increase in interest rates was necessary as the risks of inflation were showing up. He notably expressed skepticism about the story that the trade war is approaching the resolution, which means that “the Fed must be vigilant”.

This point of view contradicts the growing expectation of the rate drop market while the Fed is trying to support economic growth. Crypto.News Analyst Crispus Nyaga commented in an article on April 4 This drop in interest rates is historically optimistic for Bitcoin (BTC) and other asset classes.

He added that any decision to increase prices could cause additional friction to the White House, which could put pressure on President of the Fed Jerome Powell Despite its independence.

Powell, which has a year left in his mandate, was at the center of this tension, with previous reports indicating that the president had planned to dismiss him, a threat which has since been returned.

Sri-kumar’s message was clear: expect more volatility to come, both from unpredictable geopolitical changes and a central bank sailing in a treacherous inflationary landscape.

No concessions, no clarity

According to Sri-Kumar, recent interactions between the United States and China demonstrate an unbalanced dynamic. While the American administration has mitigated its pricing threats, China has not made significant concessions in return.

“Trump, after a big speech on the 145%prices, is now willing to descend without any dealership from Chinese,” said Sri-Kumar.

As such, the president weakened the negotiation position of the United States. He criticized what he perceives as an inconsistent strategy of the administration, stressing that the markets and foreign leaders now provide that the difficult speeches of Washington will end up having to soften if the markets are starting to weaken.

“It is a very bad negotiation strategy,” he said.

He also noted that the trade war has perpetuated uncertainty for American manufacturers, who are wary of new or return prices if the negotiations are embedded. While the markets come together to encourage comments from the White House, the uncertainty companies were confronted a few days ago “have not disappeared”.