Federal Reserve Chair Pumps the Brakes on Another Jumbo-Sized Rate Cut in 2024
Jerome Powell Speaks at NABE-Organized Summit
Bitcoin’s price trended downward on Monday after Federal Reserve Chair Jerome Powell signaled that the US Central Bank was not in a hurry to slash interest rates by huge margins. Speaking at a summit organized by the National Association for Business Economics (NABE), Powell said inflation was cooling and the labor market was solid.
Despite these positive statistics, the Fed Chair indicated that a repeat of September’s jumbo-sized borrowing rate cut should not be expected at this year’s FOMC meetings.
The Federal Reserve adopted dovish monetary policies on September 18th, lowering interest rates for the first time since 2020. After raising the rates for two years to curb inflation, which hit a two-decade high, the US Central Bank lowered them by 50 basis points last month.
Why Reduced Rates Matter in Crypto
Lower interest rates usually favor risk assets such as stocks and digital currencies. This narrative is evidenced by Bitcoin’s price action since the rate cut. According to data from CoinGecko, the digital asset is up 8% since September 18th.
While Powell does not expect the FOMC members to suggest a 50-basis-point rate cut at the upcoming meeting, he indicates that there might be two more cuts before the year ends if the US economy performs as per the Federal Reserve’s expectations.
Traders Predict a 25-Basis-Point Rate Cut in October
Meanwhile, data from CME Group’s FedWatch Tool show that traders now believe a 25-basis-point interest rate cut will be announced at the next FOMC meeting later this month. Furthermore, these traders are optimistic that the Fed’s borrowing rate could drop by 75 basis points to around 4.00% in 2024.
Regarding the inflation rate, the latest Personal Consumption Expenditures report shows that inflation has increased by 2.2% in the last 12 months. That figure isn’t far from the Federal Reserve’s 2% target. This could be why BRN researcher Valentin Fournier believes a 50-basis-point cut can happen again in October.
She, however, expects the Fed to factor in the unemployment data, set to be released on Friday, before considering cutting the rates further.
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