Three senators called for the Fed to cut interest rates by 0.75%. FedWatch data suggests investors don't believe such a big cut is in the realm of possibility this month. Financial status.
The Federal Reserve is expected to step on the gas and cut interest rates by 0.75% at the next Federal Open Market Committee meeting on Wednesday.
That's according to Democratic senators Elizabeth Warren, John Hickenlooper and Sheldon Whitehouse. He wrote a letter to US Federal Reserve Chair Jerome Powell on Monday.
“For months we have been calling on you to lower the federal funds rate,” the senators wrote. “Your delays threaten the economy and leave the Fed behind the curve.”
Democrats wrote that high interest rates were constraining the labor market and pushing the US economy toward recession.
Interest rates, now between 5.25% and 5.5%, should be cut immediately from 4.5% to 4.75%, lawmakers said, with the goal of lowering them to somewhere between 3% and 3.5% — a level they described as very close to neutral.
“Job numbers will adjust slowly, so the Fed should frontload rate cuts to avoid a slide toward a potential crisis,” the senators wrote.
This is the fourth time this year that Warren Powell has been pressured to cut rates, at least in writing. The senator from Massachusetts first called for a cut in interest rates in March.
Wednesday meeting
Higher interest rates make borrowing more expensive and encourage investors to buy risk-free US Treasury bills, impeding liquidity in the economy.
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Lowering interest rates, consequently, makes it easier for people to borrow. This pushes investors to venture into risk-on investments like stocks. Bitcoin, like tech stocks, performs particularly well in a low-rate environment.
Powell announced on August 23 that the US central bank will cut interest rates at the next FOMC meeting on September 18.
market Assigning A FedWatch data showed a 41% chance of a rate cut of 0.25% and a 59% chance of a 0.5% cut. Currently, the 0.75% cut demanded by senators is virtually impossible.
However, the market gives The 79% odds that interest rates will be cut anywhere between 4.25% and 4.75% in November mean investors expect the Fed to make at least one or two larger-than-normal cuts of 0.5% or 0.75%.
But big rate cuts don't bode well for markets because they can be seen as a sign that policymakers are panicking and that they see the economy as dangerously weak.
“50 [basis point] A cut could send the wrong message to markets and the economy. It can send an urgent message and, you know, it can be a self-fulfilling prophecy,” George Lagarias, chief economist at consulting firm Forvis Mazars, said. Said CNBC Two weeks ago, poor economic data raised the possibility of a recession again.
At the time, Matt Haugan, chief investment officer at crypto investment firm Bitwise, has been posted The US central bank is unlikely to take drastic action in X.
“0.5% is radical for the Fed,” writes Haugan. “In the last 40 years there has been only one instance of a 0.5% decrease during non-emergency. I struggle to see. However, going into a rate cut cycle is good.
Tom Carreras writes about markets for News. Have a tip on Powell, Warren, interest rates or Bitcoin? arrive at [email protected]
Related TopicsJerome Powell Federal ReserveElizabeth Warren
