The US Federal Reserve (Fed) is at a critical point. The decision on the adjustment of interest rates, scheduled for September 18, has sparked intense debate among economists.
Neil Dutta, head of economics at Renaissance Macro, argues that a cut of just 25 basis points in interest rates could have adverse consequences. “Unless something changes, the 25th will tighten financial market conditions, pushing up interest rates,” warns Dutta.
According to him, monetary policy operates through markets, and in the current context, where the risks of unemployment exceed those of inflation, “more restrictive financial conditions should be avoided.”
Gregory Daco, Chief Economist at EY, shares a similar view on the risks of a minimal cut“People are saying, well, 25 basis points doesn’t really matter. But the risks are asymmetric,” points out Daco.
If the Fed does not ease monetary policy as much as markets anticipate, “then you will see a re-pricing of rates and a move higher,” which could negatively impact consumer spending, sentiment and the economy in general, according to Daco.
Analysis from BlackRock, one of the world’s largest asset managers, adds a layer of complexity to this scenario. As reported by CriptoNoticias, BlackRock has suggested that the rate cut will not be as significant as the market expects. This outlook suggests that market expectations may be overestimating the magnitude of monetary reliefwhich could trigger a correction in asset prices.
In the cryptocurrency space, especially bitcoin, a 25 basis point cut could have a dual impact. On the one hand, it could be interpreted as a sign of caution from the Fed, which could initially push BTC prices down due to uncertainty and potential liquidity contraction. However, in the long term, if the market perceives this cut as the start of a series of bearish adjustments, it could eventually benefit assets like bitcoin, which are often seen as safe havens against inflation and expansionary monetary policy.
On the other hand, a 50 basis point cut could be seen as a stronger signal that the Fed is looking to stimulate the economy, which has historically been positive for stock markets and, by extension, for cryptoassets. This move could increase liquidity, boosting the price of bitcoin and other cryptocurrencies, at least in the short term, due to a greater appetite for risk and the search for higher returns.
The debate over the impact of a rate cut, whether 25 or 50 basis points, reflects not only immediate concerns about the U.S. economy, but also the expectations and reactions of the global financial market, including the world of cryptocurrencies.
This article was created using artificial intelligence and edited by a human on the editorial staff.