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A number of financial organizations and market experts are now predicting that the US Federal Reserve, the nation’s central banking institution, will reduce interest rates from the present target rate of 4.25%-4.5% at least twice in 2025.
The banking predictions followed a disappointing August employment report that revealed only 22,000 jobs were created during the month, compared to forecasts of approximately 75,000.
Analysts at Bank of America, a financial services corporation, changed their previously maintained view of no rate reductions in 2025 and are now anticipating two cuts of 25 basis points (BPS), one in September and another in December, as reported by Bloomberg.
Economists at the investment banking entity Goldman Sachs are forecasting three reductions of 25 BPS in 2025, commencing in September and extending through October and November.
The banking powerhouse Citigroup also predicts a cumulative reduction of 75 BPS in 2025, distributed in increments of 25 BPS in September, October, and December, as reported by Reuters here.
More than 88% of traders now foresee a 25 BPS reduction at the next Federal Open Market Committee (FOMC) Meeting in September, with around 12% of traders anticipating a 50 BPS cut, according to statistics from the Chicago Mercantile Exchange (CME) Group.
Decreased interest rates inject liquidity into cryptocurrency markets and are recognized as a significant catalyst for increasing cryptocurrency values and prolonged bull markets, whereas higher rates exert the opposite influence on asset valuations.
Related: Bitcoin surges, but feeble US employment data hampers bulls again: Is it time to venture or retreat?
Most traders now expect rate reductions amid substantial employment figures revisions
Federal Reserve Chair Jerome Powell indicated a possible rate cut in September during his keynote address at the Jackson Hole Economic Symposium in Wyoming on August 22.
This address occurred amidst indications of a faltering US job market, which forms part of the Federal Reserve’s dual objective of attaining maximum employment and maintaining price stability.
“The US has just adjusted the June employment report downward for a second time, resulting in a total of -160,000 jobs. Now, the US has officially lost 13,000 positions in June,” stated the Kobeissi Letter in a post on X.
The Kobeissi Letter also cautioned that the US Bureau of Labor Statistics (BLS) has revised the 2024 job figures downward by around 818,000, and may potentially modify the 2025 numbers down by as much as 950,000 jobs.
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