The Federal Reserve’s first interest rate cut is expected to occur in the third quarter of 2024, rather than the fourth, as previously predicted by investment banking behemoth Goldman Sachs, according to a Friday, Reuters story.
The change occurs as the 10-year U.S. Treasury yield, or the so-called risk-free rate, has declined, a bullish combination that has helped bitcoin (BTC) and the larger cryptocurrency market soar in recent weeks. Other bullish factors include the anticipated launch of a spot ETF in the United States, the upcoming halving of Bitcoin mining rewards, and those developments.
At the end of the following year, traders of Fed funds futures expect a drop to a range beginning at 4%, from the Fed’s benchmark interest rate, which is currently 5.25% to 5.5%.
Interest rate reductions make borrowing more affordable, which encourages risk-taking across financial markets, including cryptocurrency markets. When rates increase quickly, the opposite occurs, as seen in 2022.
In order to control inflation, the Fed began its tightening cycle in March 2022 and raised interest rates from as low as 0% to 0.25%. The most recent increase took place in July. Risky assets, such as cryptocurrencies, were negatively impacted by the sharp increase in borrowing costs last year.