A December 18 update from Singaporean digital asset firm QCP Group revealed that the Fed might announce a 25-basis-point interest rate cut during the last Fed meeting of the year. The rate cut during the meeting, which is set for December 18, will be the third cut the Fed initiated this year.
The firm also speculated that the rate cut might be the last the Federal Reserve delivers in a while. According to QCP Group, the Fed will be ‘non-committal’ in its statement as there is no clear outlook about rate cuts once President-elect Donald Trump gets into office. The firm still expects that there will be three rate cuts in 2025.
The central bank will release a statement at 2:00 PM ET, revealing its rate decision and next year’s ‘dot plot’. A New York Times report suggested that the borrowing rates will end at 4.4% after the expected rate cut.
The Fed began cutting rates in September to lower consumer prices and improve employment and labor markets. The economy has stayed on target, showing significant growth. Labor markets and the country’s employment have also remained solid despite inflation stalling in November.
During a recent New York Times event, the Fed’s chair, Jerome Powell, commented that he was content with the country’s current economic situation and monetary policies. Powell still mentioned that the Fed could afford to be ‟a little cautious.”
November inflation report causes uncertainty about Fed rate cuts
Inflation rose again in November, matching expectations from analysts in this year’s final report for rising consumer prices ahead of an expected rate cut. https://t.co/W8O9pMNzNK pic.twitter.com/YVkC1euxxg
— Forbes (@Forbes) December 11, 2024
The U.S. National Bureau of Statistics recently released the November inflation report, causing economic uncertainty among analysts. The report indicated that consumer prices spiked 2.7% year-on-year compared to October’s 2.6% rise. The unemployment rate also rose to 4.2% from last month’s 3.7%. The U.S. producer price index (PPI) also rose by 0.4% from October.
Some Fed officials mentioned that it was time for the central bank to slow down and find the policy balance. The current sentiment revolved around whether the implementations would tighten policies, leading to an economic slowdown, or ease policies, influencing economic growth.
St. Louis Federal Reserve President Alberto Musalem suggested earlier this month that the Fed should slow down on rate cuts. Musalem still did not specify when the Fed was supposed to pause. The Fed official also stated that the central bank was nearing its employment and price stability goals.
Richmond’s Fed Reserve president, Tom Barkin, also supported a slower approach to Fed rate cuts. Barkin explained that a ‘slower, more careful path’ would allow the central bank to reach a slightly restrictive policy level that could help it achieve the neutral rate sooner.
QCP Group expects an insignificant effect on the markets
QCP Group speculated that the rumored Fed rate cut might have little to no effects on capital and crypto markets. The firm still explained that investors should watch out for decreasing market liquidity, which could indicate ‘gappy moves’ and incoming large liquidations.
The Singaporean firm further speculated on the BTC price movement after the Fed meeting, saying that the technical outlook was cautious. They suggested that today’s price movement indicated a bearish divergence. The coin has dropped by over 2.2% in the last 24 hours, trading at $104,910 at the time of writing.
QCP still warned investors not to short their positions despite any price drop BTC might experience. The firm explained that the long-term outlook for the coin was bullish, especially with the incoming pro-crypto president, Trump.
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