Central Bank Reduces Interest Rates by 0.25 Percent, Digital Currency Markets Remain Unresponsive, Possible Optimistic or Pessimistic Shift Coming Up?
In a recent meeting of the Federal Open Market Committee (FOMC), led by Chair Jerome Powell, the Federal Reserve Board made a significant move by announcing a 25 basis points (bps) rate cut. This marks the fourth rate cut this year, bringing the total to 4.25%.
The decision was not influenced by pressure from President Trump, but rather based on economic criteria. In his statement, Powell referred to the rate cut as a "risk management cut." He also projected the Fed Funds Rate to be at 3.6% by year-end.
The hiring rate is currently very low, and the layoff rate is also very low, indicating a stable labour market. However, the downside risks to employment have risen due to softened labor demand. Early signs of goods prices showing through to higher inflation have been observed, and the growth of economic activity has moderated, with the activity in the housing sector remaining weak.
The rate cut was expected by most members of the crypto community. The well-known crypto analyst predicts that the crypto market will likely see a positive reaction to the Federal Reserve's rate cut. On the other hand, a reputed crypto analyst predicts a huge fall in the crypto market prices and expects September to close in bearish red.
The crypto market's response to the rate cut is yet to be seen. Some analysts are waiting to see if it will be bullish or bearish. It's important to note that the Federal Reserve Board only announced the rate cut after certain criteria had been met, one of them being plummeting unemployment rates.
Powell stated that if rate cuts were to be announced, they would be spaced out with short rate cuts at appropriate intervals as the criteria reacted to market changes. There was no widespread support for a 50 bps rate cut, and the rate cut announced was not as large as President Trump had hoped for, who wanted a 75 bps cut.
In conclusion, the Federal Reserve's rate cut is expected to have a significant impact on the economy, but its exact effects on the crypto market remain to be seen. As always, it's essential for investors to stay informed and make decisions based on their own research and risk tolerance.
