Fed Rate Cut: Why A 25Bps Cut Is “Pretty Straightforward”

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As a seasoned financial analyst with over two decades of experience under my belt, I find Loretta Mester’s stance on a potential 25bps Fed rate cut to be a prudent and well-reasoned one. Her insightful comments, backed by a deep understanding of the economic landscape, resonate with my own observations.

Loretta Mester, former head of the Cleveland Federal Reserve, recently shared her thoughts on a possible interest rate reduction during the upcoming FOMC meeting in November. According to her, a reduction by 0.25 percentage points (or 25 basis points) appears quite likely at this stage, and she provided reasons for this viewpoint.

A 25bps Fed Rate Cut Is “Pretty Straightforward”

In a recent CNBC interview, Loretta Mester suggested that a 0.25 percentage point reduction in the Fed’s interest rate appears to be a logical step now, given the significant decrease in inflation from its highest level, although it still hasn’t reached the US Federal Reserve’s desired 2% mark.

She alluded to all the recent inflation data since the September FOMC meeting, which she claimed doesn’t change the base narrative that inflation has come down and the growing confidence that it will continue to trend downward.

As a crypto investor, I’ve been closely watching the economic updates, and it seems that the unemployment rate is gradually improving. The latest job data indicates a thriving labor market. Given these positive signs, it appears that the Federal Reserve might be considering loosening monetary policies as the U.S. economy stabilizes.

Master’s remarks surfaced following the publication of U.S. employment data, revealing a modest increase of 12,000 non-farm jobs in October, falling short of the projected 110,000. Interestingly, the jobless rate persisted at its initial level of 4.1% for the month.

As an analyst, I observed that the lower-than-anticipated job figures might be attributed to the recent hurricanes in the U.S. last month. Despite this, I find it reassuring that the unemployment rate held steady, indicating a resilience in the U.S. economy that seems to contradict the less optimistic picture painted by the non-farm payroll numbers.

Similar to Mester, traders appear optimistic that the Federal Reserve’s next move will involve a 0.25 percentage point reduction in interest rates. Data from the FedWatch tool indicates a near-certainty of approximately 99.8% for this 0.25 percentage point cut at the November FOMC meeting.

The Significance Of An Interest Rate Cut

A decrease of 0.25 percentage points in the Fed’s interest rate might trigger an increase in the price of Bitcoin surpassing its previous record high of $73,700. In response to a 50 basis point reduction during the September FOMC meeting, Bitcoin and the overall cryptocurrency market displayed optimistic reactions.

As a researcher, I find it noteworthy that the Federal Reserve’s interest rate decision is scheduled merely two days following the November 5th US presidential elections. Given this timing, the potential post-election climate, combined with a possible rate cut, could create an optimal scenario for a surge in the Bitcoin and cryptocurrency market.

Participants in the cryptocurrency sector, such as BitMEX co-founder Arthur Hayes, advocate for heightened attention on the Federal Reserve’s decisions rather than the outcome of the U.S. election. According to Hayes, the result of the U.S. election won’t affect Bitcoin. Instead, he points out that excessive money printing and increased issuance of U.S. debt could potentially drive up the value of Bitcoin.

If a study by CoinGape predicts, it’s possible that the Bitcoin price might decrease by 8% to 13% if Kamala Harris is elected president. Conversely, should Donald Trump win the election, Bitcoin could potentially exceed its all-time high and climb up to $80,000 or more.

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2024-11-01 17:52