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Fed under pressure to lower interest rates
The president of the Federal Reserve, Jerome Powell, has given several indications about the next reduction in the official federal interest rate. He has stated that the banking regulator must stop the quantitative tightening (QT) process that began a couple of years ago.
QT refers to a gradual increase in interest rates to reduce inflation and remove excess supply from the market. QT is the opposite of quantitative easing, which aims to inject additional supply into the market to provide the necessary spark for a stagnant or sluggish economy.
September’s 0.25% rate cut is expected to be the first of multiple reviews of official interest rates in the coming months. Powell has been under considerable pressure from President Donald Trump regarding these rate cuts, and it appears he has finally decided in favor of them.
However, this time, efforts to make an effective decision on the monetary policy rate have been affected by a data blackout caused by the current US government shutdown. The government crisis of almost a month has been prolonged due to the lack of agreement between the White House and Congress. Without accurate data, the Labor Department may not be able to provide an accurate inflation figure in the form of CPI, and without that, a reported rate cut could also be challenging.
Bitcoin to a new ATH?
These rate cuts are likely to boost markets, including the digital currency sector, but positive developments tend to fade quickly.
However, the actual development could be very different based on recent experiences. September saw the first 25 basis point rate cut and Bitcoin hit new highs in anticipation. However, the bulls were unable to maintain their momentum and the index suffered a 6% price correction immediately afterwards.
So while a new ATH is in play right now, the bulls have had an October to forget and need to start posting consistent gains if they want to salvage the bull case for the foreseeable future.
