One of the leading investment banks worldwide, Goldman Sachs anticipates the US Federal Reserve may cut down four times during the next two years commencing from third-quarter 2024. Besides that, it is expected that during this move and also because of the next halving in April would have serious influence on the crypto market.
Goldman Sachs Revises Rate Cut Prediction
Investor’s decisions depend a lot on US interest rates. Initially Goldman Sachs predicted the first Fed Fund Rate cut to occur in December 2024 but due to new data they now expect the rate cut in Q3 of 2024. This is against reports of rising inflation rates across America with signs of a boosting labour market made by Reuters on December 11.
Now the Fed is expected to reduce the discount rate to 4.875 percent in the fourth quarter of 2024 (down from 5.13 in 2024q4). Therefore, this update occurred after strong job market report released on December 8 indicated that unemployment rate reduced from 3.9% reported in October to 3.7%.
The expected rate cuts and their implications for the crypto market
According to Reuters, investors reckon that even a hot labour market will not discourage the Fed from cutting its rates.” These changes are expected to take place by the beginning of next year which is before Goldman Sachs’ third-quarter anticipation. Goldman Sachs noted:
Strong GDP levels and employment numbers show no urgent reason for reduction, though better inflation statistics may pave a way for normalization earlier on.
Currently, the federal fund rate that is determined by the Fed or the Federal Open Market Committee for the USA banks ranges from 5.25% to 5.50%. The cost of borrowing reduces as a result of this, making it cheaper for individuals and businesses leading to higher risk-taking in many markets such as the case of bitcoin and other cryptocurrencies. On the contrary, rise in rates, which are often used to fight inflation and reduce the buying power of a fiat currency, can limit inflow of funds to crypto markets.