Expectations of interest rate cuts in the US

• The market already estimates that the Fed will begin to reduce interest rates at the end of 2025, with cuts of 0.25 percentage points in September and another in October  .

• Authorities such as Simona Mocuta and Neil Dutta advocate for cuts as early as the American summer (June–July), citing controlled inflation and weaknesses in the labor market .

At the moment (June meeting), the expectation is that rates will remain between 4.25% and 4.50%.

⸻

Impact on stablecoin issuers such as USDC

• Circle, the issuer of USDC, maintains a solid portion of its reserves in US Treasury securities, benefiting from high interest rates.

• Each cut of 50 basis points could reduce its annual interest income by about $625 million  .

• Estimates from JP Morgan and other banks indicate cuts of up to 100 basis points by the end of 2026.

👉 This directly impacts Circle's profitability, which in 2024 received almost all of its revenue (98%) from interest on reserves .

⸻

Effects on the adoption and business model of USDC

• Although lower interest rates reduce earnings on Treasury bills, lower rates tend to stimulate greater circulation of stablecoins, increasing their use .

• Circle believes it can offset part of the revenue decline by increasing transactions and driving new revenue sources through USDC-related services .

Next steps:

• Continue to monitor inflation data in the US (CPI, PCE) in the coming months — especially in June and July, which may influence the Fed.

• Watch Circle's reports (such as the recent IPO) on circulating volume and gains not related to reserves .