There are strong signals that The Federal Reserve (The Fed) will not cut interest rates in the September meeting. Based on several economic indicators and political considerations, this decision is predicted to put pressure on global financial markets, including the cryptocurrency market.
1. Overheating Economy: While U.S. inflation may have slowed, recent data shows that core inflation remains high. The labor market is still tight with low unemployment rates, raising concerns that the U.S. economy might be overheating. If The Fed cuts interest rates too soon, it could trigger further inflation, endangering long-term economic stability.
2. Global Political Uncertainty: With rising geopolitical tensions between major powers like the U.S., China, and Russia, The Fed may be reluctant to take risky steps such as cutting interest rates amid global instability. A too-loose policy could make global markets more vulnerable to external shocks, exacerbating volatility and uncertainty in an already highly fluctuating crypto market.
3. U.S. Debt Crisis: The United States recently faced a fierce debate over the debt ceiling and long-term budget prospects. With a high budget deficit, The Fed may feel the need to keep interest rates higher to maintain investor confidence in the dollar and U.S. bonds. Cutting interest rates too quickly could send a signal that The Fed is less committed to fiscal stability, which in turn could shake risky markets like cryptocurrency.
4. Global Slowdown: While the U.S. appears strong, many other major economies are showing signs of weakness. The economies of Europe and China are slowing, and the potential impact on the U.S. economy is a major concern. If The Fed cuts rates now, they might run out of ammunition if a global recession suddenly worsens. Therefore, they are likely to remain cautious and keep rates high to maintain monetary policy flexibility.
Impact on the Crypto Market:
The Fed's decision not to cut interest rates could create panic in the crypto market. Investors might be worried about the continuation of tight monetary policies, as high interest rates tend to reduce interest in speculative assets like $BTC , $ETH , and other altcoins. Additionally, reduced global liquidity due to high interest rates will diminish capital inflows into the cryptocurrency market, potentially causing digital asset prices to plummet in the coming weeks.This development could also trigger large sell-offs from whales and institutional investors who view risky assets as even more dangerous in an uncertain economic environment.