Rosenberg: Fed to Cut Rates Sooner and More Deeply Than Markets Expect
David Rosenberg, president and chief economist at Rosenberg Research, argued that political pressure on the Federal Reserve raises the risk of policy errors and that the Fed will likely cut interest rates sooner and more aggressively than current market pricing implies. Rosenberg said the Fed should be more forecast-dependent because policy works with long lags (about a year to peak effect), and relying solely on backward-looking data risks mistimed actions. He expects inflation to return to target by Q2 and pronounced disinflation through 2026, noting negative rental-rate trends and fading tariff effects will push CPI lower. Rosenberg also highlighted a bifurcated U.S. economy: uneven stock-market gains (roughly 40% of S&P 500 members hadn’t risen year-to-date), disparities in capital spending, and demand-driven cooling in the labor market. Key implications: earlier-than-expected rate cuts, lower inflation trajectory, and continued market divergence.
Bullish
An earlier and larger-than-expected Fed easing cycle is typically bullish for risk assets, including cryptocurrencies. Rosenberg’s forecast that inflation will return to target by Q2 and that pronounced disinflation will occur into 2026 implies the Fed may cut rates sooner, lowering real yields and improving liquidity — conditions that historically support higher crypto prices. Short-term: expectancy of faster rate cuts can trigger rallies as traders price in easier policy and reduced dollar strength; volatility may rise around macro data (CPI, PCE) and Fed communications. Long-term: sustained disinflation and lower rates can provide a favorable macro backdrop for growth assets, encouraging capital allocation to higher-risk investments. However, risks remain — policy missteps, renewed inflation surprises, or an abrupt change in Fed guidance could prompt swift risk-off moves. Similar past episodes: 2020–21 monetary easing supported strong crypto rallies; conversely, the 2022–2023 rate-hike cycle drove prolonged crypto drawdowns. Traders should monitor inflation prints, Fed forward guidance, real yields, and market liquidity to time entries and manage leverage and stop levels.