Fed Rate Cuts Eyed by Year-End: Impact on Crypto Markets
San Francisco Fed President Mary Daly signaled that the Fed may implement Fed rate cuts as soon as this year, citing a weakening labor market and stable inflation near the 2% target. She said two Fed rate cuts would still be an appropriate adjustment and did not rule out more by year-end. The FOMC decision will hinge on upcoming economic data, including job growth and price metrics. With four current FOMC members leaning toward a rate cut, the Fed would need three additional votes if Chair Powell dissents. Traders should monitor labor reports and inflation indicators closely. Fed rate cuts can affect risk assets, especially the crypto market, by reducing funding costs and boosting investor appetite for higher-yielding digital assets.
Bullish
Fed rate cuts typically lower borrowing costs and increase liquidity, which tends to boost risk-asset demand, including cryptocurrencies. In the short term, markets may rally as traders price in potential rate cuts and favourable funding conditions. Over the longer term, sustained low rates can support higher valuations for digital assets by improving risk-taking appetite. However, timing uncertainty and data-dependent decisions could introduce volatility around Fed meetings and economic releases.