The Federal Reserve recently announced that a potential reduction in the benchmark interest rate could occur in September 2024. This news has been eagerly awaited by many investors and traders, as a decrease in interest rates is often seen as a sign of economic improvement in the United States.
Additionally, lower interest rates typically boost riskier assets, as safer investments yield less return, making assets like Bitcoin more attractive. As a result, Bitcoin’s price has surged to around $61,000.
Potential Interest Rate Cut in September
The Federal Reserve has hinted that inflation in the United States is now under control, nearing its target of 2%. With inflation improving and unemployment rates rising, members of the Federal Open Market Committee (FOMC) believe that a reduction in interest rates would be a prudent move.
This sentiment was expressed during a symposium and in the announcement of the latest meeting’s outcomes, which took place in the early hours of the morning, specifically at 02:00 WIB or 03:00 WITA. In the FOMC statement, the majority of committee members indicated that the benchmark interest rate should be lowered in the coming months. They are concerned that if the interest rate is not reduced, the circulation of money could decrease, further worsening the employment situation.
However, the United States is still grappling with high inflation, and a lower interest rate could exacerbate this issue. On a more positive note, during the symposium, which also took place in the early hours, Jerome Powell, Chairman of the Federal Reserve, stated that inflation in the United States has begun to improve and is approaching the 2% target.
At the Fed’s most recent meeting, Jerome Powell indicated that interest rates would continue to decline without waiting for inflation to precisely hit the 2% mark. The plan to lower the benchmark interest rate next month could be a concrete step towards this goal, making this possibility increasingly likely.
Nevertheless, some FOMC members remain opposed to this move, given the economy’s ongoing struggles. Thus, there is still no definitive clarity on whether the interest rate will indeed be lowered in September.
Volatility Likely to Persist
In light of these developments, the Federal Reserve will likely issue additional statements in the coming days. Consequently, volatility is expected to persist until the interest rate announcement, typically made in the first week of September 2024.
On the other hand, volatility may also continue due to ongoing geopolitical uncertainties, where the potential for conflict remains. Within the United States, significant political uncertainty also lingers, particularly regarding the presidential election in November 2024. The outcome of this election will be crucial in determining the future of the U.S. economy and, by extension, the cryptocurrency market.
As the U.S. still accounts for the largest trading volume in financial markets, this election’s results will have far-reaching impacts, with crypto being a significant asset within this market category. Regulation will also play a key role, as the election’s outcome will shape the future of cryptocurrency in the United States.
Therefore, although the market’s current trajectory appears positive, the risk of volatility remains high. Traders and investors must continue to exercise careful risk management to capitalise on long-term potential, especially as 2024 draws to a close.
At present, the majority of cryptocurrencies are trading within a broad consolidation zone, indicating that significant price appreciation may not occur in the near term. This could be an opportune moment to prepare, particularly if there is a need to rebalance portfolios to seize greater opportunities in the future.
