The US Federal Reserve has kept interest rates steady at 4.25%-4.5% for five consecutive meetings. This decision has sparked interest and discussions about potential future changes.
Possibilities of Interest Rate Cuts in the US
Recently, the probability of a rate cut in September was under 45%, but the rise in the unemployment rate to 4.2% and the revision of previous employment data changed the outlook. Rate cut expectations have surged to 80%, as the markets believe the Fed can no longer afford to wait.
"Plenty can happen before the 17th September FOMC meeting, but it’s looking more and more likely we will get a rate cut to the 4 to 4.25 range, i.e. a 25 bps cut," said crypto analyst Matthew Dixon.
Crypto Market's Reaction to Economic Changes
The economic slowdown and geopolitical tensions triggered by new US tariffs have had a negative impact on the crypto market. Bitcoin fell by 3% to $113,231, while Ether and Solana dropped by 6% and 5%, respectively. In the last 24 hours, BTC and ETH saw $228 million and $262 million in liquidations as traders were forced to sell at market prices to cover margin positions.
Investors are jittery, and the Fed's delay in rate cuts is now being viewed as a misstep, adding to market panic.
Future: CPI Data as a Decisive Factor
The final major data point before the Fed's September meeting will be the Consumer Price Index (CPI). If inflation shows signs of cooling, analysts expect it to lock in the case for a rate cut.
"If CPI slows down, expect a good rally and a confirmed rate cut in September," noted one economist.
A rate cut could revive interest in cryptocurrencies as lower rates tend to push investments towards riskier assets. Expectations that the Fed will maintain a dovish stance may lead to long-term stability in the digital asset space.
