ING predicts that while the Federal Reserve may postpone rate cuts in the near future, when the cuts do happen, they may be more substantial than expected.
On Wednesday, the Federal Reserve kept its benchmark interest rate unchanged at 4.25% to 4.5%. During his press conference, Chairman Jerome Powell expressed concerns about the risk of stagflation, with both inflation and unemployment becoming growing threats to the economy.
Crypto and traditional markets had been closely following Powell’s statements, hoping for signals on when the Fed might ease rates. ING noted Powell’s comments that “uncertainty about the economic outlook has increased” and “the risks of higher unemployment and inflation have risen,” indicating that the Fed is likely to maintain its cautious approach for at least a couple more meetings.
The investment bank suggests that the Fed is in a “wait-and-see” mode, which could delay any rate cuts. However, once the central bank feels more confident about the economic data, they may implement larger cuts to compensate for the delay. ING expects this cautious stance to persist through the September meeting.
The Fed’s hesitation to act is likely influenced by concerns over global trade issues and disruptions in supply chains, which could further fuel inflation and complicate economic recovery.
Meanwhile, Bitcoin saw a strong rally following the Fed’s decision, rising from $96,000 to $99,500. This surge was partly driven by President Donald Trump’s comments teasing a potential trade deal with a major economy, which helped revive investor sentiment and risk appetite.
