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Highlights
- Trump told Powell to make a larger cut than he has in mind.
- The Fed is expected to cut rates by 25 bps.
- A rate cut is expected to be bullish for the crypto market.
U.S. President Donald Trump is making a last-ditch push ahead of the FOMC meeting this week. The president has again urged Powell to make a large Fed rate cut, one bigger than the Fed may currently be planning. A potential rate cut could be bullish for Bitcoin and the broader crypto market, as BitMEX co-founder Arthur Hayes predicted.
Trump Presses Powell To Make A Higher Fed Rate Cut
In a Truth Social post, the U.S. president said that “Too Late,” in reference to Powell, must cut interest rates now, and that it must be bigger than what he has in mind. This marks Trump’s latest push to get the Fed to lower interest rates.
Notably, this comes after Trump floated the idea of a 100 basis points (bps) Fed rate cut last week. This is in line with his belief that interest rates should be 300 bps lower by now, having urged the Fed to cut rates since he took office at the start of the year.
With a rate cut expected at the FOMC meeting this week, the issue is no longer about whether there will be lower interest rates but about the magnitude of the imminent cuts. As CoinGape reported, economists predict that the Fed will make a 25 basis points (bps) rate cut instead of a 50 bps cut.
CME FedWatch data also shows that there is a 94.2% chance of a 25 bps Fed rate cut following this week’s FOMC meeting. Meanwhile, there is only a 5.8% chance that the Fed will make a 50 bps cut.
The odds of a 50 bps rate cut dropped from above 10% following the CPI data release last week. Inflation rose to 2.9% in August. Although this is in line with expectations, it has raised concerns that inflation may be rising. However, a rate cut is more than likely due to the evident softening in the labor market.
Why A 25 Bps Cut Is Better Than A 50 Bps Cut
During a CNBC interview, former Federal Reserve Vice Chairman Roger Ferguson explained why a 25 bps Fed rate cut is better than a 50 bps cut at the upcoming FOMC meeting. He noted that the data have reinforced the notion of a weak labor market, but that there has also been a spill over into higher prices.
Meanwhile, he opined that Jerome Powell will state that further rate cuts this year will depend on incoming data. Commenting on whether the current data supports a 50 bps cut, he indicated that the Fed hasn’t been able to tame inflation to their 2% goal, which is why they wouldn’t want to make such a cut despite the weakening labor market.
Amid the debate of a 25 bps or 50 bps Fed rate cut, experts such as BitMEX co-founder have predicted that the Bitcoin bull cycle could extend thanks to a rate cut cycle. He expects the Fed to begin cutting rates aggressively from this upcoming FOMC meeting and that it would extend until next year.
Hayes still expects Trump to find a way to print more money, even if the Fed doesn’t go on an aggressive rate-cutting cycle. He also noted that Powell’s tenure will end next year, which will pave the way for the U.S. president to appoint a Fed chair that aligns with his goals.
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