Jerome Powell, the Federal Reserve Chair, has hinted at a potential cut of 25 bps in rates if the economic performance shows positive signals. This stems from the recent inflation rate, which shows that it is below 3% and close to the target of 2%. To be more specific, the inflation rate as of June 30, 2024, is 2.97% and could head to 2.5% in the coming months.
Any rate cut, if any, would come maximum by September and rely on the upcoming inflation rates. Interestingly, he has hinted that a cut of 50 bps is not a possibility at the moment. Per the CNBC report, it is only a cut of 25 bps, which is on the table for consideration. A detailed report further sheds light on the neutral stand of the Federal Reserve. Powell said that the agency remains neutral with no inclination toward any political party or political candidate.
Meaning, it does not matter which political party comes to power or which presidential candidate has a better chance of winning the US elections; it is purely economic circumstances that will work for the Reserve Bank to cut the rate or keep it the same.
The announcement fulfills the expectations of traders and investors. A cut in borrowing costs enables them to allocate funds to assets. This contains assets with high risks. Cryptocurrencies fall into this category, therefore a rate cut would help them fuel liquidity in the ecosystem.
A rate cut is tentatively scheduled to happen in September this year, but it could happen sooner.
The recent inflation rate is lower than the previous month’s number. It was 3.27% on May 31, 2024. There is a possibility that the inflation rate will come down. At the most, it will remain at the same level. Nevertheless, progress and the potential for improvement will work for the Federal Reserve.
Jerome interacted with the media to state that the Central Bank will be apolitical, adding that they don’t use their tools to support any political party or even oppose it. He ruled out the possibility of a 50 bps cut by saying that that was not something they were thinking about at any moment.
All eyes are on the labor market. Relevant authorities are committed to staying vigilant for signs of a sharp downturn. The Fed Chair noted that low unemployment and low layoff levels suggest a normalized labor market.
Reports indicate that challenging geopolitical conditions in the Middle East are impeding the growth of the cryptocurrency market. Bitcoin and Ethereum are reported to have slipped below $64,000 and $3,200, respectively, in the last 24 hours. Also, presidential candidates are gearing up to meet leaders from the digital assets market with intentions to woo them or ease tensions with them.
