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Only 45.9% of investors anticipate an interest rate cut at the next US Federal Open Market Committee (FOMC) meeting in December, amid declining market sentiment and a downturn in the cryptocurrency market.
The probability of a 25 basis point (BPS) interest rate hike in December was nearly 67% on November 7, according to data from the Chicago Mercantile Exchange (CME) Group.
In September, many banking institutions foresees at least two cuts in interest rates in 2025, with market analysts from investment banking company Goldman Sachs and banking giant Citigroup each projecting three cuts of 25 BPS in 2025.
Interest rate decisions influence crypto prices. Lower interest rates translate into more liquidity flowing into asset markets and pushing up prices, while higher rates mean liquidity and prices will be constrained.
Declining odds of a rate cut in December are fueled negative market sentiment and may signal that more short-term price pain is coming to the crypto market until the Federal Reserve resumes easing rates.
Related: The demand for Stablecoin is growing, and it can push interest rates: Miran of the Fed
Federal Reserve’s Jerome Powell doubts a December rate cut
“There were many different opinions on how to proceed in December. A further reduction of the policy rate at the December meeting is not a foregone conclusion – far from it. The policy is not on a predetermined course,” Jerome Powell, chairman of the Federal Reserve. he said in October.
As expected, the Federal Reserve rates reduced by 25 BPS in October; however, crypto prices extended his decline after the lowered rates.
The October rate cut was “completely priced in” by investors, who had widely anticipated the cut months ahead of time, according to Matt Mena, a market analyst at investment firm 21Shares.
The economist is former hedge fund manager Ray Dalio warned that the Federal Reserve is cutting rates amid record asset prices, relatively low unemployment and low credit spreads, a historical anomaly.
In November, Dalio said that the Federal Reserve is likely stimulate the economy in a bubbleadding that this is a typical feature of debt economies that are heading towards hyperinflation and currency collapse.
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