Former Boston Fed President Eric Rosengren has outlined the potential for two interest rate cuts this year. He cited recent Federal Open Market Committee (FOMC) discussions and stabilizing inflation trends. “I am expecting we’ll probably get some more favorable inflation numbers over the next couple of months,” he opined. ‘I Don’t Think We’re Down to […]
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European Central Bank Cuts Rates by 0.25%, Confirms Data-Driven Approach for Path Ahead
The European Central Bank announced cuts of 0.25% (or 25 basis points) on three of its main interest rates: the main refinancing operations, the marginal lending facility, and the deposit facility. President Christine Lagarde emphasized that future decisions regarding additional cuts will depend on market reactions and evolving data. European Central Bank Cuts Interest Rates […]
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Shibarium’s New Checkpoint Mechanism Cuts Ethereum Bridging Time
The Shiba Inu (SHIB) network development team has dramatically improved the Shibarium network, according to a post from the Shibarium network’s X account. The work reduces the token bridging time to Ethereum from seven days to roughly 45 minutes, aiming to enhance Shibarium’s operational efficiency and the overall user experience. This was accomplished by introducing […]
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Goldman Sachs CEO Forecasts No Fed Rate Cuts This Year
David Solomon, CEO of Goldman Sachs, expressed doubts about the Federal Reserve cutting interest rates this year due to the resilient economy, bolstered by government spending and investments in AI infrastructure. Despite these factors, Solomon highlighted the impact of rising prices on consumer behavior, referencing recent reports from McDonald’s and Autozone indicating reduced spending. He […]
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No Fed Rate Cuts? No Worries For Bitcoin, Says Research Firm
As the US economy grapples with rising inflation expectations and scaled-back forecasts for Federal Reserve rate cuts, the Bitcoin market remains buoyant, according to a detailed analysis by Reflexivity Research. With the US CPI headline inflation projected to accelerate to 4.8% by the November 2024 elections, according to Bank of America, conditions are seemingly unfavorable for a loosening of monetary policy. Despite this, the cryptocurrency sector, particularly Bitcoin, appears insulated and optimistic.
Bitcoin Unfazed By Delayed Rate Cuts?
The bond market now anticipates only three Federal Reserve rate cuts this year, a significant reduction from the earlier forecast of six. The CME FedWatch tool indicates that the majority of market participants do not expect a rate cut to occur before the mid-September FOMC meeting. This adjustment reflects a recalibration of expectations regarding the Fed’s capacity to manage persistent inflation pressures.
Amidst these macroeconomic shifts, Ritik Goyal, in a guest post for Reflexivity Research, presents a compelling analysis in his report titled “The Fed is Unable to Cause a Recession. Risk Assets are Yet to Realize This.”
The report argues that, contrary to conventional wisdom, the Federal Reserve’s rate hikes have had unintended stimulative effects on the economy. Goyal elucidates three specific mechanisms through which this phenomenon operates:
1. Increased Government Interest Payments: “Rate hikes raised interest payments by the government to the private sector,” Goyal notes. As the Fed raises rates, it increases the interest burden on the government, which has borrowed extensively during the post-COVID period. With the federal debt-to-GDP ratio exceeding 120%, the doubled interest payments now effectively act as a stimulus, channeling approximately trillion annually to the private sector
2. Direct Subsidy to Banking System: The Fed’s policy adjustments have also led to a redistribution of wealth within the financial system. “Rate hikes raised the Fed’s direct subsidy to the banking system,” states Goyal. This has occurred as the yield curve inversion resulted in the Fed incurring losses on its balance sheet, losses that directly benefit the banking sector, translating to an estimated 0 billion annual subsidy.
3. Induced Housing Construction Boom: The rate hikes have paradoxically stimulated the housing market. “Rate hikes induced a housing construction boom,” according to Goyal. As higher rates discourage existing homeowners from selling, the only viable option to meet housing demand is new construction, a sector with one of the highest GDP multipliers.
Goyal’s insights underline a critical misalignment in the Fed’s current approach against the backdrop of substantial fiscal interventions since the pandemic. “The traditional monetary policy framework is breaking down under the weight of fiscal dominance,” Goyal concludes, suggesting an environment that could favor non-traditional assets like Bitcoin.
Echoing Goyal’s findings, crypto expert Will Clemente highlighted the broader implications for cryptocurrencies on X (formerly Twitter), stating, “With debt/GDP as high as it is, we’re in a backwards world where high rates mean interest payments on debt are stimmy checks for people that buy assets—~T will be paid out in 2024. Big picture is very constructive for the internet coins.”
At press time, BTC traded at ,173.
Uncertainty Over Fed Rate Cuts Intensifies With Sticky Inflation Metrics
As each day unfolds, analysts, economists, Wall Street institutions, and Fed watchers have increasingly postponed their forecasts for when the U.S. Federal Reserve will reduce the benchmark interest rate. Current data suggest that a rate cut in June is unlikely, with odds standing at 50-50 for a reduction in July. Financial Analysts Question Timing of […]
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Rate Cuts Could be ‘Out the Window’ After March CPI Data Reveals Stubborn Inflation, Tradestation Exec Says
The U.S. Consumer Price Index (CPI) experienced a higher increase than anticipated in March, climbing by 0.4% over the month to reach 3.5%. The Bureau of Labor Statistics reported that the rise was primarily fueled by increases in shelter and gasoline costs. This acceleration in the inflation rate has unsettled the financial markets, with many […]
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Former IMF Economist Raises Alarm on US Debt as Atlanta Fed Chief Signals Potential Rate Cuts
A leading economist has expressed deep concern over America’s soaring trillion national debt, warning of no significant efforts to mitigate it. Meanwhile, Federal Reserve Bank of Atlanta President Raphael Bostic suggests a potential easing of policy rates by summer. Ex-IMF Chief Economist Voices Concern Over Soaring U.S. Debt Olivier Blanchard, a senior fellow at […]
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Near Foundation Cuts Staff by 40%, CEO Says Organization Is in Good Financial Health
The NEAR Foundation recently said it has let go of 35 workers as part of a realignment exercise that sees it “focus on a narrower and higher-impact set of activities.” The foundation’s CEO insisted that the job cuts did not in any way indicate that his organization was facing financial challenges.
The NEAR Foundation’s Record-Breaking Year
The NEAR Foundation announced on Jan. 11 that it had cut its staff by approximately 40% as part of a realignment process that will see it “focus on a narrower and higher-impact set of activities.” Illia Polosukhin, the CEO of the Swiss-based nonprofit foundation, has however pledged to help the 35 employees find other opportunities in the Web3 industry.
According to his letter addressed to the NEAR community, the job cuts are coming off the back of what the CEO characterized as a successful 2023. Some of the successes achieved in the past year include the NEAR protocol becoming home to three top ten apps in Web3. In the same period, the NEAR protocol reportedly saw a record number of daily users.
However, despite these achievements, Polosukhin said a review of the NEAR Foundation’s activities showed that changes were needed to make the protocol even better. The CEO explained:
“During this process, we heard feedback that the Foundation has not always been as effective as it could be, sometimes moving too slowly and trying to do too many things at once. Following this review, we have decided to significantly consolidate the core Foundation team to focus on a narrower and higher-impact set of activities.”
Polosukhin, however, insisted that the job cuts did not in any way indicate that the foundation was facing financial challenges. To support this assertion, the CEO pointed to NEAR Foundation’s well-managed treasury which has over 5 million in fiat. In addition, it has 305 million NEAR coins worth over billion and million in investments and loans.
Meanwhile, Polosukhin’s letter revealed that most of the affected workers were from the marketing, business development, and community teams. However, the NEAR Protocol engineering team at Pagoda is set to continue operating as it has in the past.
What are your thoughts on this story? Let us know what you think in the comments section below.
Morgan Stanley’s Chief Economist Predicts Rate Cuts ‘This Year’ as Market Eyes Federal Reserve’s Next Move
This year, mirroring last year’s speculation, market observers are keenly awaiting decisions from the U.S. Federal Reserve concerning the federal funds rate, with a particular focus on potential rate cuts this year. Ellen Zentner, Morgan Stanley’s lead economist in the U.S., predicts rate reductions in the coming months. However, she cautions that the central bank has the luxury of patience, suggesting they are in no rush to make these changes.
Market Awaits Federal Reserve’s Target Rate Decisions
All eyes are on the Federal Reserve’s next moves and currently, according to the CME Fedwatch tool, the market anticipates a projected 25 basis points increase at the upcoming Federal Open Market Committee (FOMC) session. A commanding 95.3% of market predicts an increase, whereas a mere 4.7% foresee the federal target rate maintaining its current stance. This echoes remarks made by Federal Reserve Bank of Dallas President Lorie Logan on Saturday.
Addressing attendees at the American Economic Association conference in Texas, Logan stressed the necessity for the central bank to “maintain sufficiently tight financial conditions,” warning of the danger that inflation could rebound, undermining the progress achieved thus far. The head of the Dallas branch further noted:
In light of the easing in financial conditions in recent months, we shouldn’t take the possibility of another rate increase off the table just yet.
Logan’s remarks come subsequent to the FOMC’s minutes from Dec. 14-15, 2023, underscoring the Fed members’ deliberations on restoring standard monetary policy. The committee said it examined ongoing inflation pressures and their consequences for the central bank’s asset acquisition initiatives. With inflation consistently surpassing 2% for an extended period, the Fed decided to decrease the monthly rate of net asset purchases.
Economists are expecting rate reductions in the near future, particularly following Fed Chair Jerome Powell’s dovish approach during the last FOMC meeting. Powell noted at the time that the central bank is “very focused on not making the mistake of keeping rates too high too long.” Ellen Zentner, Morgan Stanley’s chief U.S. economist, anticipates rate reductions this year, she disclosed to an audience at a three-day summit in San Antonio.
“Make no mistake, they will be cutting rates this year,” Zentner told the audience. “[However,] they can be patient and they can take their time,” she added. Meanwhile, market expectations tilt towards rate cuts and a possible hike at the end of this month. The economist from Morgan Stanley predicts the initial rate reduction will take place in June. Dante DeAntonio, senior director at Moody’s Analytics, concurs with the expectation of a June 2024 rate decrease.
“It looks increasingly likely that the Fed will be able to engineer a soft landing as they have pivoted to discussing the outlook for possible rate cuts in 2024,” DeAntonio explained in a bankrate.com survey. “The Fed will likely make the first cut in June 2024, but the pace of cuts will be quite low — leaving ‘higher for longer’ intact,” the Moody’s Analytics executive added.
What do you expect the Federal Reserve will do this year? Do you expect rate cuts in 2024? Share your thoughts and opinions about this subject in the comments section below.