In recent months, the economic situation in the US has become increasingly tense. The question of interest rates has taken center stage in the country's economic discourse, with ramifications for financial markets and Bitcoin.
Political Pressure on the Fed
President Donald Trump is pushing the Federal Reserve (Fed) to cut interest rates by 300 basis points, which could trigger inflation and destabilize bond markets. This tension is exacerbated by a 10% drop in the dollar since the beginning of the year and rising inflation expectations.
Consequences of Unforeseen Economic Measures
While maintaining rates may seem a prudent option, it will not shield the economy from inflation, a significant portion of which is already visible due to tariffs and Trump’s economic measures. Core PCE inflation is expected to rise to 3.0-3.2%, and debt servicing costs will increase, placing a heavy burden on the economy.
Macro Economic Effects on Bitcoin
Depending on the Fed's actions, Bitcoin may become a preferred asset. In a scenario of sharp interest rate cuts and high inflation, cryptocurrency could see a rapid increase, whereas in a steady market, growth may be slower. In any case, Bitcoin continues to gain popularity as a hedge against economic instabilities.
The economic and political changes sparked by Trump create uncertainty for the future of the dollar and bond markets, while Bitcoin appears to be becoming an increasingly attractive asset amidst inflationary pressures.
