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Highlights
- Goldman Sachs has made changes to its Fed rate cuts trajectory.
- The once-expected June rate drop has now been further delayed until September or later by market.
- The markets for cryptocurrencies may be impacted by this.
Goldman Sachs has made changes to its Fed rate cuts trajectory, bouncing back to predicting three rate cuts by the end of this year. TheStreet states that the change predicts the first rate reduction to happen this June, being in line with larger market consensus.
Goldman Sachs Rate Cut Prediction
Initially, the first interest rate reduction by the Federal Reserve was predicted by Goldman Sachs experts to occur in December 2024. It revised its forecast in mid-December 2023, announcing that the Fed will reduce interest rates three times, with the first one taking place in 2024’s third quarter. They set out to make four cuts in February, the first of which was scheduled for May.
According to the influential investment firm’s most recent estimate, there will be three rate decreases this year, the first of which is scheduled for June. Additionally, they plan to make four cuts in 2025 and one in 2026. They estimate that terminal interest rates will range from 3.25 to 3.5%.
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Fed Rate Cuts Delay to Likely Impact Crypto Markets
Since December 2023, the market has priced in about three rate reductions for 2024; the first rate cut was anticipated at the March meeting. But consistent signals from economic data and the Fed officials themselves sharply reduced expectations of the same. Parallel to this, the once-expected June rate drop has now been further delayed until September or later. The markets for cryptocurrencies may be impacted by this. This brings the Fed rate cuts anticipation much further than expected.
The Federal Reserve chairman, Jerome Powell, has already stated that he does not think the US economy is headed for a recession. Nonetheless, he made the point that it is hard to forecast when the central bank may lower interest rates and encourage current growth because of the uncertainty surrounding potential inflationary gains.
What Will Crypto Markets Focus on?
When assessing assets, investors have traditionally placed a great deal of weight on the Federal Reserve’s rate decisions. Government securities usually lose value when interest rates are lowered, which makes bitcoin and other cryptocurrency assets more appealing. The Fed’s decision to postpone rate reduction may lead investors to elect to hold onto traditional assets for the time being, which has prompted volatility in the cryptocurrency markets. Better still, a strong economy maintains high levels of investor demand.
Riskier investments are preferred in thriving economies where purchasing power is often stable. Under such circumstances, it seems improbable that the Fed’s decision will slow the present rate of expansion in the cryptocurrency markets.
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