Traders Anticipate Federal Reserve Rate Cuts by September
- Traders forecast Federal rate cuts by September, influencing crypto dynamics.
- CME Tool shows significant cut probability, shifting market strategies.
- Potential rate cuts may encourage crypto market liquidity and growth.
Market expectations for a September rate cut are significant due to ongoing economic pressures and potential impacts on risk assets like cryptocurrencies.
The Federal Reserve hasn’t changed interest rates recently, but traders foresee a shift by September. CME Group’s FedWatch Tool shows the market assigning a 75% likelihood to a 0.75% rate cut by year’s end. Historically, softer Fed policies lead to crypto rallies. Major cryptocurrencies like Bitcoin and Ethereum have previously appreciated when interest rates fall, as traditional finance yields become less attractive. TVL in DeFi protocols often rises during these periods.
The potential rate cuts could greatly affect market behaviors. Historically, such moves have led to greater liquidity and activity in the crypto markets, including increased TVL in DeFi. Institutional positioning often aligns with these expectations, influencing broader financial strategies. Crypto asset markets could see notable movements if the Federal Reserve opts for a rate cut in the coming months. The anticipation of rate reductions aligns with earlier cases where decreased federal rates resulted in heightened crypto asset prices and DeFi activity.
Jerome Powell, Chair, Federal Reserve, said, “Fed held rates steady for a second straight month and provided economic projections forecasting slower growth and higher inflation by year-end.”
