The U.S. Federal Reserve has cut its benchmark interest rate to 4.75% from 5%. This quarter-point cut is aimed to increase borrowing by making it cheaper for businesses and consumers and boost the economy. This will enhance economic growth and control inflation. Earlier, a similar cut was made in June to fight economic cooling or slowdown.
Moreover, this rate cut will have a strong impact on the cryptocurrency market. If interests are reduced, then the returns on traditional assets like bonds and savings accounts will be lowered. This will enhance the presence of cryptocurrencies, and investors could invest in high-potential assets like Bitcoin or Ethereum.
However, markets involving cryptocurrencies are highly vulnerable and unpredictable. It implies that while some profits can be made, investors have to anticipate fluctuations due to changes in market sentiment.
According to the economists, should the Fed persist with the rate cuts, they might see more funds flow to crypto as the market looks for opportunities in a low-interest rate world. Adding up the two cuts made this year, the funds rate of the Fed has been lowered by 0.75 %. However, a large impact could be expected if the Fed prolongs the decrease of the rates in December or in the following year.
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In general, a 0.25% rate cut will guarantee that the Fed pays attention to the market dynamics and inflation pressure. Additionally, the conservative approach to the rates benefits both crypto and traditional traders. Notably, Fed Chair Jerome Powell stated that he would not step down till his term expires in 2026. He further added that the new governance would not affect the interest rate policy.
