Highlights
- US Fed Minutes reveal a shift towards a more accommodating monetary policy stance.
- Fed officials consider a September rate cut to boost economic growth and curb unemployment.
- The crypto market reacts positively, with Bitcoin price crossing the brief $61,000 mark.
The US Fed Minutes from the July meeting have cemented bets over a potential September rate cut. This move has fueled speculations over a rally in the broader financial sector, let alone the crypto market. Notably, the minutes from the July 30-31 meeting showed that the US central bank officials are leaning towards a dovish move with their policy rates given the recent set of economic data supporting the stance.
US Fed Minutes Raised Bets Over September Rate Cut
The Federal Reserve’s July meeting minutes have revealed a shift toward a more accommodating monetary policy. According to the latest release, the officials showed a willingness to cut interest rates in September.
Notably, the minutes highlight that most participants believed a rate cut would be appropriate if economic data continued to support this decision. Notably, this would mark the first rate reduction since the emergency measures during the early days of the COVID-19 crisis.
Meanwhile, as the Federal Open Market Committee (FOMC) voted to keep rates steady in July, several members expressed a desire to begin easing as early as that meeting. The minutes reflect growing confidence among officials regarding the direction of inflation, suggesting that the US central bank is prepared to act dovish if favorable economic conditions persist.
A 25 basis point reduction was discussed, with some officials believing that waiting too long to ease could weaken the economy. In addition, the report pointed to concerns over rising unemployment risks and a downgraded outlook for economic growth in the latter half of 2024.
The Fed’s acknowledgment of these challenges has reinforced market expectations for a rate cut, as easing too late could have adverse effects on the economy. In addition, it has also cemented bets over a potential September rate cut, that the market was highly anticipating.
Crypto Market Rally Ahead?
The crypto market was up following the release of the US Fed minutes from their July meeting. The global crypto market cap was up over 2% to $2.14 trillion. Simultaneously, BTC price was up around 3% and traded over the $61,000 mark, while ETH price rose 1.5% to $2,635.
Notably, according to the CME FedWatch Tool, there is a 62% probability of a 25 bps point cut by the US central bank in September. The remaining percentage is betting over a further larger 50 basis point cuts at the upcoming meeting.
Meanwhile, the anticipation of a September rate cut has fueled optimism in the broader financial markets, with the crypto sector poised to benefit significantly. Lower interest rates generally boost market confidence, encouraging greater investor participation. For the crypto market, which has seen increased volatility and uncertainty, a rate cut could be the catalyst for a new rally.
On the other hand, the Fed’s dovish stance could enhance the risk appetite of traders who have been cautious amid economic uncertainties. As confidence grows, these traders may be more inclined to invest in digital assets, potentially driving up prices across the crypto market.
Following the release of the US Fed Minutes, the US dollar index slipped 0.31% to $100.982. Simultaneously, the US 10-year Bond Yield plunged 0.97% to 3.782.
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