The Federal Reserve is likely to cut interest rates in September. Fed Chair Jerome Powell said it was time for a “policy adjustment.”
It's finally happening.
Federal Reserve Chair Jerome Powell on Friday gave strong indications that the US central bank will soon cut federal interest rates.
“It's time to adjust policy,” Powell said at the Kansas City Fed's Jackson Hole Economic Symposium in Wyoming.
“The direction of travel is clear and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks,” Powell added.
That's good news for Bitcoin and the rest of the crypto ecosystem — it behaves like risk-on assets and is especially vulnerable to favorable economic environments.
According to FedWatch data, the market Expectations There is a 65% chance of the US central bank cutting rates by 0.25% in September and a 35% chance of a 0.5% rate cut.
“If not 0.5% in September, at least 0.75% by the end of the year,” said Quinn Thompson, founder of crypto hedge fund Lecker Capital. has been posted In X following Powell's speech.
“The biggest takeaway for me is that this is definitely not a 'one and done' speech,” Thompson added. “It's a strong belief [multiple] Reduction of rates.”
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The Federal Reserve has started raising its interest rate from zero in March 2022 to combat raging inflation. Through July 2023, rates are raised between 5.25% to 5.50%, marking the fastest and largest rate hike cycle in US history.
High interest rates encourage investors to buy Treasury bonds to get solid risk-free returns. When interest rates are low, investors tend to seek returns through riskier vehicles like stocks and crypto.
Lower interest rates make money easier for investors, which further encourages spending and improves the economy.
Anticipated interest rate cuts — combined with a weaker dollar — are likely to fuel the next crypto rally, David Brickell, head of international distribution at FRNT Financial, and former forex trader Chris Mill, wrote this week in their newsletter, “Connecting the Dots.” .
“The bullish evolution of the macro prepares the ground for Bitcoin's next phase to a new record high,” they said.
Tom Carreras is a market correspondent at News. Got a tip about Bitcoin and the Federal Reserve? Reach [email protected]
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