Crypto Market Bullish as Standard Predicts 50bps Fed Rate Cut

TLDR

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Standard Chartered now expects a 50bps Fed rate cut due to rising U.S. unemployment.
U.S. unemployment rose to 4.3%, prompting rate cut expectations ahead of the FOMC meeting.
Bitcoin and Ethereum prices climbed after weak U.S. jobs data and policy shift signals.
Fed officials Waller and Bowman support a rate cut to counter softening labor conditions.

Rising optimism surrounds the crypto market as Standard Chartered revises its forecast, now expecting a 50-basis-point interest rate cut by the U.S. Federal Reserve at the upcoming FOMC meeting. The projection follows weaker-than-expected jobs data and growing signs of a softening U.S. labor market. This potential shift in monetary policy is fueling increased demand for risk assets like Bitcoin and Ethereum, boosting market sentiment ahead of key inflation data releases.

Standard Chartered Expects Aggressive Fed Rate Cut

Standard Chartered has updated its forecast for the next Federal Reserve policy decision, now expecting a 50bps rate cut instead of its previous 25bps estimate. The change is linked to the latest U.S. labor report, which showed unemployment rising to 4.3%—the highest rate since late 2020.

According to the bank, the labor market has weakened faster than expected. In a recent client note, analysts stated that the shift from “solid to soft” labor conditions happened in less than two months. They also pointed to similar macroeconomic conditions in the past when the Fed made a surprise 50bps cut.

Several major financial institutions remain cautious. Barclays and Bank of America expect smaller rate moves, while Morgan Stanley and Deutsche Bank are skeptical of an immediate 50bps reduction. However, most agree that the case for easing is gaining traction. The CME FedWatch Tool currently assigns a 90% chance to a 25bps cut and just a 10% probability to a full 50bps cut.

Fed Officials Signal Openness to Rate Cuts

Recent public comments by Federal Reserve officials suggest there is support within the central bank for easing monetary policy. Governor Chris Waller told CNBC that “it’s time to start cutting rates,” citing a clear softening in labor market data. He said this could be the beginning of a broader rate adjustment cycle.

Governor Michelle Bowman also voiced concern over rising unemployment, encouraging colleagues to consider a cut at the next meeting. “We should respond promptly to signs of weakness in the labor market,” she said. Both Waller and Bowman said inflation remains a concern, but believe current conditions allow for more flexibility.

The FOMC will meet next week, and the outcome may be influenced by upcoming inflation data. The Consumer Price Index (CPI) and Producer Price Index (PPI) reports are expected on September 10 and 11. These numbers could play a key role in determining whether the Fed opts for a 25bps or 50bps cut.

Crypto Markets Rally Ahead of Fed Decision

The crypto market is reacting positively to expectations of lower interest rates. Bitcoin prices moved higher after the release of the jobs report and Standard Chartered’s updated forecast. A rate cut would reduce borrowing costs and could lead to increased flows into risk assets.

Lower interest rates generally push investors toward alternative assets. With Treasury yields expected to drop, cryptocurrencies may see more demand. Ethereum and other top altcoins have also posted gains in recent days, reflecting stronger confidence among market participants.

The potential policy shift is seen as a short-term boost for crypto. Analysts say that a rate cut would improve market liquidity and reduce the cost of capital. While macro risks remain, traders are watching the Fed closely, with most expecting some form of policy easing next week.

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