The Federal Reserve's interest rate policy and its effects on the cryptocurrency market.
Federal Reserve Chairman Christopher Waller opened the possibility of a rate cut as early as next month, in line with President Donald Trump's suggestion. In an interview on CNBC's Squawk Box, Waller emphasized that policymakers should not wait for economic conditions to worsen before taking action.
"We can do this as early as July," Waller mentioned, referring to the possibility of a rate cut at the Federal Open Market Committee (FOMC) meeting on July 29-30. "That's my view, whether the committee agrees or not."
This message follows the FOMC's decision on Wednesday to maintain the benchmark interest rate in the range of 4.25% to 4.5%, reiterating the pause for the fourth time since the last cut in October 2024.
Trump's policies and their impact on cryptocurrency interest rates.
President Trump, who appointed Jerome Powell as Fed Chairman and Waller during his first term, believes that high interest rates are hindering economic growth and pushing the national debt cost of $36 trillion higher. He called for a reduction of at least 2 percentage points, even suggesting a cut of 2.5 points below the current level. While Powell remains cautious, political pressure is increasing.
Recently, Waller's comments indicate an internal tendency to propose a gentle rate cut, marking the first time since Trump returned to the White House.
"Why are we waiting for a crisis to cut rates?" Waller said. "I think it's time to consider starting to adjust interest rates at the next meeting."
Divided policy within the Fed regarding the rate cut.
Although Waller is a voting member, the decision to keep interest rates unchanged by the FOMC was unanimous. Predictions from the dot plot indicate that among 19 policymakers, 7 do not expect any change in interest rates until the end of the year. Meanwhile, 2 anticipate one cut, while 10 believe there will be at least two cuts in 2025. This suggests there may be a clear divide within the Fed.
According to the Polymarket prediction platform, there is an 89% chance that interest rates will remain unchanged at the July meeting, with only 10% betting on a 25 basis point cut.
Predictions for the Fed's July decision. Source: Polymarket.
Waller's policy shift and the idea of reducing interest rates.
Waller acknowledged that while he prefers a rate cut, he supports doing so gradually and cautiously. "You should start slowly and reduce gradually to avoid big surprises. But we need to start the process," he said. "We have paused for six months waiting for data, and so far, the data remains stable."
Chairman Powell warns about the impact of tariffs on inflation.
In Wednesday's press conference, Powell stated that new trade restrictions are gradually raising consumer prices. "We are starting to feel the impact," he said. "Inflation is rising slightly," and recent data shows short-term inflation expectations have surged in consumer surveys and the market.
Powell directly blamed Trump's tariffs as the main cause. However, Waller countered that the impact of tariffs would only be a temporary hindrance and would not cause prolonged inflation.
"We believe we can maintain a watchful regime," Powell said. Current inflation data shows the intermediate impact is not clear, mainly because businesses are still processing inventory ahead of tariffs. Weak consumer demand also limits businesses' ability to raise prices, allowing the Fed to be more flexible in monetary policy.
Source: https://tintucbitcoin.com/fed-co-the-ha-lai-suat-tien-dien-tu-thang-7/
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