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Crypto Eyes Rally As Expert Predicts Accelerated Fed Rate Cut Despite Strong Job Data

Author October 7, 2024

Crypto experts and enthusiasts are expecting the US Fed rate cut by 25 basis points both in November and December. It seems crypto market is already responding with slow but certain growth. Meanwhile, the US economy surpassed expectations, according to the Bureau of Labor Statistics (BLS).

Despite the positive labor market data, the Federal Reserve is expected to continue with its quantitative easing measures. This policy typically increases the money supply through debt. This generally benefits the crypto markets by driving more capital into cryptocurrencies.

Fed Rate Cuts Begin: Positive Signs for Crypto Investors

The central bank kicked off Fed rate cut cycle in Septemeber with a larger-than-expected half-point reduction, committing to keeping unemployment low as inflation nears the 2% target. Over 100 economists now predict further 25-basis-point cuts in both November and December. The crypto market is already showing slow but steady growth in response.
Also, the newest US job data indicated that the September nonfarm payroll number rose to 254,000, beating market expectations. The unemployment rates went lower than expected, thus cooling down market optimism and signaling Bitcoin and altcoin prices might be due for a greater fall. In the meantime, BlackRock CIO Rick Rieder has predicted for the Fed to cut interest rates by a further 25 basis points at this month’s FOMC meeting.
Generally, QE is a monetary policy that increases the supply of money through debt and favors the crypto markets. In the case of the Federal Reserve injecting liquidity into the economy, the controlled inflationist environment will reduce the yields on bonds and further force the investors to seek better returns in more speculative assets, including cryptocurrencies and stocks.

In theory, lower interest rates should drive investors away from safe havens such as US Treasuries and into more risk-on, high-reward pursuits. The Fed rate cut usually brings up prices of both Bitcoin and the major US stock indices.

But these effects are always relative to the wider macro context that includes national stability, currency sovereignty, and the labor market situation.

Of course, the upcoming decision by the Fed will set the tone for what the crypto market can expect in the following months. If this indeed ushers in a cycle of increasing liquidity without major shocks, then it would more likely than not suggest one development toward the return of the bull market.

What Does Jobs Data Mean for Future Fed Decisions?

It is not just the job data crypto market is eager for. The cryptosphere members are also keenly awaiting the upcoming US CPI data set to be released, with this news essential in determining the extent of inflationary pressures. Moreover, such information is assessed by the US central bank to deduce the level of inflation within the country. This is one of the key pointers that informs the Fed monetary policy. The expectations are folding over a cooling inflation data. According to market forecast, it is expected that the CPI reading would fall to 0.1% from 0.2% while the inflation is placed at 2.3% from 2.5%.

According to Seema Shah, chief global strategist at Principal Asset Management, “that monster upside surprise just erased any case for a half-point Fed rate cut in November.” She added that with the Fed already easing, recession risks have significantly declined. She also warned that markets should keep a keen eye on inflation because policy risks are no longer one way but both.

Meanwhile, Samuel Tombs, chief US economist with Pantheon Macroeconomics, was much more conservative. The chief economist said that the “strength of the 313,000 September payroll gain is very likely to be revised away,” as response rate to the Labor Department’s survey came in notably low. The survey received responses from only 62% of businesses in time, below the usual response rate over the past decade of 77%.

FED CONSIDERED LIKELY TO SPEED UP CUTTING AFTER NOVEMBER

A 20-basis-point cut by the Fed next month “remains a good bet,” Pantheon’s Samuel Tombs says in a note, adding that labor data “will force a faster pace thereafter.” Tombs is suspicious about Friday’s much…

— *Walter Bloomberg (@DeItaone) October 7, 2024

To this, David Russell, Global Head of Market Strategy at TradeStation, added that the jobs report is evidence that shows the economy doesn’t need Fed rate cut. He continued to say that even though investors may have to get by with fewer rate cuts, they instead get stronger incomes and consumer demand-in the long run. This can be more favorable to both the stock market and the economy as a whole.

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