Moody’s Drops Bombshell On Crypto Industry Amid High Interest Rate Cuts

Moody’s Analytics chief economist Mark Zandi has given his opinion on a potential interest rate cut ahead of the US Fed’s decision. The crypto community is closely monitoring this event, given how it could impact the crypto market. 

The US Fed Should Cut Interest Rates

Zandi mentioned during an interview with Bloomberg that he believes the Fed should be looking to cut interest rates. He made this remark while stating that the financial conditions are where they need to be with the Fed achieving its goal of bringing inflation down to a considerable level. He also alluded to the employment rate, which shows that the US Fed shouldn’t hold out on interest rates for this long. 

The Fed favors the Personal Consumption Expenditures (PCE) price index as its go-to inflation indicator and has set a target of 2% for the inflation rate. However, Zandi questioned this move as he suggested that 2% isn’t the right number and should probably be higher. He also remarked that there was no point in the US Fed sacrificing the economy to the “alter of the 2% inflation target.”

The US Fed’s FOMC meeting will be between June 12 and 13, during which it will also decide whether or not to cut interest rates. Data from The CME FedWatch Tool shows a 99.4% probability that the Federal Reserve will keep interest rates unchanged. These interest rates significantly impact the crypto market since lower interest rates will boost investors’ confidence to invest in risk assets like cryptocurrencies. 

Initial projections were that the Fed would cut interest rates by the middle of the year, which presented a bullish outlook for the crypto market. However, that is now unlikely, with the Federal Reserve still looking unsatisfied with the current economic situation. This has also led financial analysts at JPMorgan and Citi to scrap their initial projections and predict that the interest rate cut will come in September or November. 

Some Positives To Hold On To For Crypto

There are still some positives to hold on to even though the US Federal Reserve is unlikely to slash interest rates at the upcoming FOMC meeting or the one in July. For one, the Spot Ethereum ETFs are expected to begin trading later this month or by early July. These funds will likely spark another run for the crypto market just like the Spot Bitcoin ETFs did. 

Additionally, the Spot Bitcoin ETFs are again in the green and are seeing impressive demand for their respective funds. The inflows into the Spot Bitcoin ETFs and Spot Ethereum ETFs could be the catalyst needed for the continuation of the bull run in the crypto market. Meanwhile, the sentiment in the market will undoubtedly become more bullish if the US Federal Reserve eventually cuts interest rates in September or October as predicted. 

Featured image created with Dall.E, chart from Tradingview.com