Crypto Eyes Rally As Expert Predicts Accelerated Fed Rate Cut Despite Strong Job Data

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As a seasoned researcher with over two decades of experience in financial markets, I have witnessed countless cycles of economic expansion and contraction. The recent Federal Reserve rate cuts and the subsequent response from the crypto market has piqued my interest once again.

Cryptocurrency specialists and fans anticipate that the U.S. Federal Reserve will reduce interest rates by 0.25% in November and December. Already, it appears that the cryptocurrency market is showing steady growth, albeit gradually. Simultaneously, as reported by the Bureau of Labor Statistics (BLS), the U.S. economy has surpassed expectations.

Despite the positive labor market data, the Federal Reserve is expected to continue with its quantitative easing measures. This policy typically increases the money supply through debt. This generally benefits the crypto markets by driving more capital into cryptocurrencies.

Fed Rate Cuts Begin: Positive Signs for Crypto Investors

The central bank kicked off Fed rate cut cycle in Septemeber with a larger-than-expected half-point reduction, committing to keeping unemployment low as inflation nears the 2% target. Over 100 economists now predict further 25-basis-point cuts in both November and December. The crypto market is already showing slow but steady growth in response.
Also, the newest US job data indicated that the September nonfarm payroll number rose to 254,000, beating market expectations. The unemployment rates went lower than expected, thus cooling down market optimism and signaling Bitcoin and altcoin prices might be due for a greater fall. In the meantime, BlackRock CIO Rick Rieder has predicted for the Fed to cut interest rates by a further 25 basis points at this month’s FOMC meeting.
Generally, QE is a monetary policy that increases the supply of money through debt and favors the crypto markets. In the case of the Federal Reserve injecting liquidity into the economy, the controlled inflationist environment will reduce the yields on bonds and further force the investors to seek better returns in more speculative assets, including cryptocurrencies and stocks.

As a crypto investor, I’ve noticed that when the Federal Reserve cuts interest rates, it tends to push investors away from traditional safe havens like U.S. Treasuries and towards riskier, high-yield investments. In practice, this often means an increase in both Bitcoin prices and major U.S. stock index values for me as an investor.

However, it’s important to remember that these impacts are usually connected to a broader global or national perspective, encompassing factors such as political stability, control over currency, and the state of the job market.

Without a doubt, the Federal Reserve’s forthcoming decision will shape the crypto market’s trajectory for the upcoming months. If this leads to an extended period of heightened liquidity with minimal disruptive events, it could be a strong indication pointing towards the potential resurgence of the bull market.

What Does Jobs Data Mean for Future Fed Decisions?

In the crypto world, it’s not just employment figures that are being watched closely. The anticipation is high for the upcoming US Consumer Price Index (CPI) data release as well. This data is crucial in understanding the level of inflationary pressures. The US central bank uses this information to gauge inflation within their country. This data plays a significant role in shaping the Federal Reserve’s monetary policy. Currently, there are expectations that the upcoming CPI reading will show a decrease from 0.2% to 0.1%. Additionally, the forecast suggests that overall inflation might drop slightly from 2.5% to 2.3%.

Based on Seema Shah’s perspective as the global strategist at Principal Asset Management, the substantial increase, or “monster upside surprise,” has effectively nullified any argument for a 0.5 percentage point reduction in the Fed’s interest rate in November. She further noted that since the Fed has already eased its policies, the risks of recession have diminished significantly. However, she urged caution as market conditions should closely monitor inflation because policy risks are no longer unidirectional but can swing both ways now.

Meanwhile, Samuel Tombs, Pantheon Macroeconomics’ US chief economist, took a more cautious stance. He stated that the robust increase of 313,000 jobs in September may well be reduced, as the response rate to the Labor Department’s survey was significantly lower than expected. The survey only received responses from 62% of businesses within the deadline, which is below the typical response rate of around 77% over the past decade.

FED CONSIDERED LIKELY TO SPEED UP CUTTING AFTER NOVEMBER

According to Pantheon’s Samuel Tombs, a 0.2% reduction in interest rates by the Fed next month appears likely. He further notes that upcoming labor statistics may necessitate a more rapid adjustment in rate cuts later on. Tombs expresses skepticism regarding Friday’s surprisingly strong employment data.

— *Walter Bloomberg (@DeItaone) October 7, 2024

David Russell, TradeStation’s Global Head of Market Strategy, further commented that the jobs report suggests the economy doesn’t require interest rate cuts from the Fed. He explained that while investors might receive fewer rate cuts, they would instead benefit from stronger incomes and consumer demand over time. This situation could prove beneficial for both the stock market and the overall economy in the long run.

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2024-10-07 19:08