Is it confirmed to cut interest rates in September? What did the Fed say?
The US Federal Reserve announced its latest interest rate meeting decision in the early morning of August 1, Taiwan time. The decision was to freeze interest rates for the eighth consecutive time and still maintain the base interest rate at 5.25%-5.5%.
However, at the post-meeting press conference, Federal Reserve Chairman Powell said that an interest rate cut may be possible in September. This is of course big news, indicating that the rate cut has started and may then enter a cycle of rate cuts. U.S. stocks immediately rose in response, and all ended the day with gains.
What exactly did Powell say?
The format of the post-meeting press conference is that reporters ask questions and Powell answers. It is necessary to piece together the various Q&A paragraphs to compile a complete view. You can refer to CNBC ’s compilation. Here are only the two paragraphs that the author thinks are the most important:
(The Federal Reserve’s announcement is relatively vague and conservative, so here we try to translate it into Chinese in a more direct way)
"The broad sense of the committee is that the economy is moving closer to the point at which it would be appropriate to reduce our policy rate."
The current economic situation is approaching a position suitable for interest rate cuts
"If that test is met, a reduction in our policy rate could be on the table for as soon as the next meeting in September."
If conditions are met, a rate cut will be discussed at the September meeting
Powell did not promise to cut interest rates in September, but he did let go of the possibility of a rate cut in September. The Fed's decision-making is extremely influential, and it usually does not make a clear commitment until it is completely certain. The loose talk is already a certain indicator. .
Is it confirmed to cut interest rates in September? Is the interest rate cut cycle starting? What are the market expectations?
As you can see from the previous paragraph, the Fed did not "promise" to cut interest rates in September, but instead sent a signal that it "may" cut interest rates in September.
How to interpret this market? The fact that U.S. stocks closed higher that day means that the market thinks this is good news, but what are the chances of a subsequent interest rate cut? It is recommended to use the SoSoValue introduced before to view:
The current benchmark interest rate is 5.25 - 5.5%. The probability of the interest rate in September being between 5.25% and 5.25% is 68.5%. According to current market expectations, the probability of a one-point interest rate cut in September is 68.5%. The probability of another one-point interest rate cut in November is 68.5%. 65%, and the probability of another one-size reduction in December is 58.5%.
(One code = 0.25%)
There is a possibility of a three-point interest rate cut in 2024, and it seems that interest rates will continue to be cut next year. If there are no surprises, it will enter a rate cut cycle. However, market expectations are floating and will change according to the situation. You can pay attention to the latest situation regularly.
Bitcoin fell after interest rate cut expectations came out?
Although the four major U.S. indexes closed higher on the day after announcing the possibility of interest rate cuts, they all fell the next day.
Bitcoin was even more ahead of its time, falling as soon as the meeting was announced.
Why did it fall after higher expectations for a rate cut? Isn’t an interest rate cut exactly what the market is looking forward to?
There are several possible reasons:
Sell the news If expectations come true, all the profits will be exhausted <br>The market has been looking forward to an interest rate cut for a long time, and there are already expectations of a 2-3% rate cut by the end of the year. The expectations may have already been priced in, and have been reflected in the price. If the expectations are realized, all the profits will be exhausted.
The loose mouth to cut interest rates also hints at the possibility of economic recession <br>The Federal Reserve mentioned that the decision to cut interest rates will not only consider inflation data, but also evaluate economic data. This is reasonable, but it may also imply that the economy will show signs of recession before it will Let the Fed start cutting interest rates before inflation falls to target
Anticipate your prediction <br>This is especially likely to happen in a market like Bitcoin where the speculative atmosphere is heavier, shallower, more emotional, and fluctuates greatly at the slightest disturbance; predict that others will interpret it as a profit. Sell first, predict that others will sell in advance, so short
There are so many factors that affect the rise and fall of the market. It is almost impossible to accurately predict short-term rises and falls under the combined influence of each other. Most of the news is just to find reasons after the fact. It is difficult to truly confirm the cause of the rise or fall 100%, so the key point is It's not about finding reasons for the decline, but thinking about what to do next.
With interest rates lowered but not raised, can the Bitcoin market still be expected? What can be done next?
Back to the general trend, let us look at a few pictures:
The red dot is the position of the U.S. benchmark interest rate during the past three Bitcoin halvings. All three times were below 1%. The past three bull markets all occurred in a low interest rate environment.
Interest rates have been above 5% so far in this bull market. It is necessary to enter an interest rate cutting cycle to bring interest rates back to lows and create a more relaxed financial environment.
Do you still remember that Bitcoin completed its fourth halving in April this year? This is the time-based increase of the first three halvings. Judging from the previous three halvings, almost all of them started three months later and broke out after half a year. The main increases occurred six months after the completion of the halving.
Corresponding to this time:
The fourth halving is completed: 2024/April 20, three months on July 20, and half a year on October 20. The major event at the end of the year is not only an interest rate cut, but also the US presidential election in November, which is related to the subsequent attitude of the US government towards cryptocurrency. .
Judging from the general trend, funds have always been a very key factor in the bull market. Last year, Biyan emphasized this part in this article:
For the market to continue after the halving, funds will still be an important factor:
An interest rate cut does not mean a bull market, but a bull market requires funds. The interest rate cut cycle will bring about a low interest rate environment, which is more suitable for the development of the bull market. Combined with the US presidential election and past halving cycles, many conditions for a bull market are being prepared, unless it is short-term. Price investment, otherwise the more important thing at this stage is layout: planning and building an investment portfolio .
From the market observation in the first half of this year, this bull market may not be a bull market with a comprehensive surge. The market dividend period of simply buying and holding to make money may be almost over, and more prudent evaluation and screening of high-quality tracks and projects are needed. , if you really don’t know what currency to buy, it is also a good strategy to buy Bitcoin at a regular fixed amount before entering the altcoin season.
Three key directions are observed in this article:
Bitcoin Ecology
meme coin
Relevant to real applications
Overall, the difficulty of market operations has increased, and it is increasingly important to master information. You can join the community to discuss and establish your own faster and more reliable information sources.
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