- The US Fed will slash interest rates by 50 bps to the range of 450-475 on September 18, 2024.
- This reduction of the interest rate would prompt investors to invest in high-risk instruments such as Bitcoin and cryptocurrencies.
- Expect further rate cuts till mid-2023 at a scale of 275-300 bps by May 23 by May 2025.
On September 18, 2024, the Federal Reserve is anticipated to reduce the federal funds rate by 50 basis points (bps). This change could have a big impact on the financial markets. The rate is expected to be lowered from its current range of 500–525 basis points to 450–475 basis points in response to growing concerns about the state of the economy and the requirement for looser monetary policy to promote growth.
In 4 days the FED is expected to drop the Rates by 50bps.
— Crypto Rover (@rovercrc) September 15, 2024
BULLISH FOR #BITCOIN!! pic.twitter.com/5YVkDT87ZJ
The potential rate reduction makes sense given other market forecasts. Approximately half of the forecast indicates that a decline is likely to occur, with data indicating such probabilities for the upcoming FOMC meetings.
The anticipated rate reduction could benefit companies and investors by reducing their interest costs and essentially repairing the harm caused by the recession. This choice, which, as we have seen, would support economic stability, would therefore have a significant impact on financial assets, such as bonds, commodities, and regular markets.
Rate-Cut Impact on Bitcoin and Other Crypto Markets
Low interest rates typically encourage more money to be invested in riskier assets like bitcoin because they typically result in low yields on other traditional assets like bonds. If cryptocurrencies are seen as a fiat currency’s inflation hedge during an extended period of easy money, this expectation may boost the market for them.
Given that additional rate cuts are mandated by the September meeting, this also points to a future path of meet cuts. In terms of probability, the decline persisted, with the likely rates revealing 400 basis points on November 7 and 425 basis points on December.
However, the prospect of three more rate cuts in a row through mid-2025 suggests that the Federal Reserve is accurate in identifying the economic headwinds. If present patterns continue, rates may fall as low as 275–300 bps in May 2005, suggesting a protracted period of rate decline.