Interest Rate Cut Prospects
Moody’s Analytics economist Mark Zandi believes the US Federal Reserve (Fed) should consider cutting interest rates. He argues that financial conditions are favorable, with inflation showing signs of cooling. Zandi also highlights the strong employment rate, suggesting that the Fed can afford to ease interest rates.
Fed’s Inflation Target
The Fed uses the Personal Consumption Expenditures (PCE) price index as its inflation indicator, targeting a rate of 2%. However, Zandi questions this target, suggesting it may be too low and could lead to unnecessary economic sacrifices.
Impact on Crypto
Lower interest rates typically boost investor confidence in riskier assets like cryptocurrencies. Initial projections of a mid-year rate cut had created a bullish outlook for crypto. However, the Fed’s current stance has dampened these expectations.
Positive Signs for Crypto
Despite the unlikely rate cut in the near term, there are some positive signs for crypto. Spot Ethereum ETFs are expected to launch soon, potentially providing a boost to the market. Additionally, Spot Bitcoin ETFs continue to see strong demand, which could support the bull run.
Outlook
If the Fed does cut interest rates in September or October as predicted, market sentiment towards crypto is likely to become more bullish. However, investors should remain cautious and monitor the Fed’s decisions closely.
