Fed Rate Cut Expectations Shift: Could We See a 50 Basis Point Drop?
TL;DR
- A recent jobs report and inflation data have increased the likelihood of a 50 basis point rate cut by the Fed to 45%, shifting market expectations.
- While easier monetary policy generally benefits risk assets like $BTC, concerns about a weakening economy may negatively impact prices.
A recent jobs report showing strong employment coupled with surprising inflation data has led to a reevaluation of the U.S. Federal Reserve's monetary policy. Initially, a 25 basis point rate cut seemed likely, but now analysts are considering a more aggressive 50 basis point cut. This shift has increased the odds of such a move to 45%, up from the high teens just days ago.
The Wall Street Journal's Nick Timiraos, known for his reliable Fed sources, indicates that the decision on the rate cut size remains uncertain. Former Fed advisor Jon Faust described the choice as a "close call," while Esther George, ex-president of the Kansas City Fed, suggested that a quick easing might be warranted due to the Fed's previous rapid tightening.
This change in sentiment has positively affected the U.S. stock market, which gained after initial struggles, and $BTC's price rose to about $58,400 before dipping to around $57,800. Although easier monetary policy is typically seen as beneficial for risk assets like $BTC, some analysts warn that a series of rapid rate cuts could signal the Fed's worries about a weakening economy, potentially leading to further declines in $BTC prices.
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