Fed Rate Cut: Lorie Logan Calls For Lower Rates If This Happens
Federal Reserve Bank of Dallas President Lorie Logan again called for gradual rate cuts, citing uncertainty in the current economy.
She explained that if the economy is moving forward, a steady path of policy-rate reductions is more than welcome. Lowering rates toward neutrality could help achieve the Fed’s goals, she said. However, she commented that economic shocks such as inflation or unemployment, could affect this pace.
Any risk of rate cuts from the Fed will inevitably raise expectations for cryptocurrencies, including Bitcoin. Traditionally, when the Fed cuts interest rates, it favors risk assets when investments become cheaper on debt and liquidity surpluses.
Fed’s Lorie Logan: Gradual Rate Cuts Coming
Therefore, Lorie Logan reiterated her call for gradual rate cuts from the Fed, given the uncertainty over the present outlook. Cuts may continue to increase prices as traditional yields become less attractive. This is forcing investors into alternative assets like Bitcoin.
Recent expectations for rate cuts have already been priced into market sentiment. Analysts predict such monetary policy easing could keep crypto demand sustained. Also, it could prop up Bitcoin’s potential as a hedge to fiat currency devaluation.
Speaking at the Securities Industry and Financial Markets Association’s annual meeting, Lorie Logan said a less restrictive monetary policy would balance the risks associated with the Fed’s dual mandate regarding inflation and employment.
Lorie Logan added that if the economy moves up, a steady path of policy-rate reductions toward neutrality could help achieve the Fed’s goals. However, she tempered these same observations by noting that different types of economic shocks can affect the pace and endpoint of such normalization. She also said that the path for the central bank may need to differ as economic circumstances change.
Economic Shocks Could Alter Rate Cut Path
Lorie Logan, meanwhile, underscored the need for flexibility. “The FOMC must be prepared to adjust policy as circumstances warrant,” she said.
The extensive experience that Lorie Logan has – managing the Fed’s SOMA has outlined the central bank’s balance sheet and funding market considerations. It also signaled that economic projections will continue to be subjected to shifts in risk.
For the first time since the pandemic began, the Fed started cutting interest rates by a half-point in last month’s meeting. It also set the new range to 4.75%-5%. The move came from concerns of a weakening labor market and inflation easing toward the Fed’s target of 2%.
Despite signs of economic slowing, recent data showing stronger-than-expected hiring in the past three months has convinced market participants that the Fed will embark on only a quarter-point cut at its next Nov. 6-7 gathering.
However, Logan warned that different economic shocks may alter the pace and the endpoint in this process of normalization. this came as a prewarning that there are signs the central bank might have to tailor its path going forward because of changing economic conditions.
However, not everyone thinks the Fed will lower rates so soon. Torsten Slok, chief economist at Apollo Global Management, said that the likelihood of the Federal Reserve not raising rates in November rises with every passing strong number on the US economy.
APOLLO’S SLOK SEES RISING CHANCE FED WILL HOLD RATES IN NOVEMBER
Tortsten Slok, Chief economist at Apollo Global Management, said the chances the Fed will leave rates unchanged in November are mounting as the US economy powers ahead. Swaps price less than a quarter-point Fed…
— *Walter Bloomberg (@DeItaone) October 21, 2024
Financial markets also see it similarly. Swaps price in less than a quarter-point rate cut for the next month, reflecting the growing perception among investors that the Fed may respond more cautiously to the economic backdrop.
Bitcoin’s Future: Key Rate Cut Ahead of Election
Bitcoin has reflected its pre-halving trajectory by regaining its upward momentum since the Federal Reserve’s interest rate cut in September. This could be a result of investors’ gradual increase in risk appetite. This is not because of the interest rate changes, but also similar policies that most global banks around the world want.
Bitwise CIO Matt Hougan recently expressed optimism for Bitcoin, predicting a significant rally that could push its price into six-figure territory. His comments align with growing institutional confidence in digital assets, particularly as inflows into Bitcoin-based ETFs indicate shifting market dynamics that may drive prices to new highs.
November is increasingly seen as a key month for Bitcoiners. The most recent polls reveal that the Fed is likely to announce a 0.25% cut in interest rates. This would decrease the rate from 4.75% to 4.5%. Experts say this would be an appropriate response to cooling inflation and a slowing labor market in the United States.
Expectations had been for a cut of 50 basis points. The more modest move is said to be because inflation is approaching the central bank’s 2% target. The FOMC will no doubt confirm this rate cut in its meeting on November 6-7. This also happens to be just 24 hours after the highly awaited US Presidential Election. All these factors put together may have a strong bearing on Bitcoin’s future course.
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