Standard Chartered has drawn significant attention from the cryptocurrency markets by predicting that the U.S. Federal Reserve (Fed) will cut interest rates by 50 basis points at its upcoming meeting. This expectation arose following the release of weaker U.S. employment data.
Standard Chartered’s Interest Rate Prediction
According to a report by Reuters, Standard Chartered anticipates that the Fed will reduce the interest rate by half a point this month. Previously, the bank had expected a 25 basis point cut, but it revised its forecast after observing August’s employment figures, which marked the weakest job growth in four years with an increase in the unemployment rate to 4.3%.
Other major banks have offered varying expectations. While Barclays and Bank of America foresee smaller, gradual rate reductions, Morgan Stanley and Deutsche Bank remain cautious about a swift 50 basis point cut. Nonetheless, all institutions agree that a rate cut is indeed on the table.
Based on the data from the CME FedWatch Tool, markets currently expect a 25 basis point cut with a 90% probability. However, there is a 10% chance of a more substantial 50 basis point move. The inflation data set to be released on September 10-11 is anticipated to directly influence the Fed’s decision.
Rising Optimism in the Cryptocurrency Market
A potential Fed rate cut could bring risk assets to the forefront. Reduced interest rates lower borrowing costs, potentially affecting cash flows into investment products. This scenario might also significantly impact cryptocurrencies.
Statements from Fed officials support this process. Fed Member Chris Waller, in an assessment made to CNBC, suggested, “We should begin with a rate cut in the next meeting.” He hinted at multiple reductions within the next six months. Another Fed Member, Michelle Bowman, emphasized that interest rates need to be lowered in September, underlining the importance of preserving the labor market.
The Fed’s approach to rate cuts is being closely monitored across both traditional and cryptocurrency markets. Any decisions made in the September meeting are expected to have a direct effect on the markets.
