Bitcoin Forum

https://coinbuzzfeed.com/citi-predicts-200-bps-fed-rate-cuts-by-july-2025-amid-economic-slowdown

Citi analysts have issued a striking forecast, anticipating that the Federal Reserve will embark on a series of interest rate cuts beginning in September 2024. According to their projections, the Fed is set to reduce rates by 25 basis points (bps) eight times, resulting in a total reduction of 200 bps by July 2025. This move would lower the benchmark interest rate from its current range of 5.25%-5.5% to a more accommodative 3.25%-3.5%.

The primary drivers behind this expected series of cuts include signs of an economic slowdown, weakening inflation, rising unemployment rates, and a negative reading on the service sector index.

Citi’s analysts point to an economic slowdown as a major factor prompting the anticipated rate cuts. Various economic indicators suggest that growth is losing momentum, necessitating a more accommodative monetary policy to support economic activity.

Another key factor in Citi’s forecast is the weakening inflationary pressures. With inflation showing signs of easing, the Fed might find more room to maneuver and cut rates to stimulate the economy without the fear of igniting runaway inflation.

Rising unemployment rates are also contributing to Citi’s prediction. As joblessness increases, the Fed is likely to lower interest rates to spur job creation and support consumer spending.

Finally, a negative service sector index further supports the case for rate cuts. A contraction in the service sector, which is a significant part of the U.S. economy, would likely push the Fed towards a more accommodative stance to prevent a broader economic downturn.

There has been a correlation between the interest rate in the US and the crypto market. A lower interest rate stimulates consumer spending and investment because borrowing becomes cheaper. It also stimulates economic activities which reduces unemployment. With more money in the hands of people, they are motivated to invest in risk-on assets, including Bitcoin and other cryptocurrencies. This could increase demand which will affect the price positively. The Fed meets eight times a year and they have met four times this this year. The next four meetings will be a major determinant factor of how far Bitcoin will go this year.

I don't know if I can quite believe a cut of such calibre. I have always heard that election years in the US tend to be bullish in the markets and the FED is in charge of cheering things up. But for me, I welcome a 200 Bps cut, if it finally happens I'm sure bitcoin will go to the moon.

Are they going to cut the rates because they fear recession or are they gonna do it because the economy is doing fine? There is a big catch. If they do it because they don’t want the economy to go into recession then the markets will crash hard. It happened many times before and I don’t think this time will be different.

If they cut the rates because the economy is in a good shape, then the markets will skyrocket. Stocks will make another ATH. Crypto too.

The important question is, are we doing OK? I can’t really decide. Somehow I have a bad feeling about this.

Unsure about the chances of 200 bps cut within 18 months. It is election year though & the Democrats don’t want to be blamed for a failing economy so I think there will be at least one, if not two rate cuts before the November election. They need to get swing voters on side to stand any chance of winning.

Mmm, yeah. 

1) Citi analysts might have no fucking idea what they're talking about, which is often the case when someone tries to predict the future--even if they have a lot of information to work with.

2) It's in Citi's best interest (no pun intended) to make a prediction like this, since lower interest rates are generally good for stocks and the housing market.

3) If Citi is wrong....they face no consequences.

I've had the feeling that the Fed really doesn't know what to do with interest rates even in the short-term, because the inflation numbers haven't established a steady pattern of dropping.  Speaking of that, the next report comes out in two days and I'm very interested to see what last month's numbers look like.

For all the claims that these central banks and the boards that they use to govern are meant to be "financial experts" that are guardians of the economy, they often prove to be too late or too slow to move correctly. They always appear to be reactionary instead of proactive, which basically led to the current situation that we are in now. If they had raised interest rates from their lows of 1-2% to a nice average of 3% many years earlier, then we might not have had the massive flood of easy money and borrowing that has caused massive inflation lately. However it's much easier to stay in your comfy job if you are not offending anyone or annoying the population by taking necessary decisions at the right time.

The Federal Reserve has made it clear many times that they have exactly two mandates: low inflation and full employment. They have made it clear many times that interest rates will remain high as long as employment in the U.S. remains high and inflation remains above their target. They have also made it clear that they are willing (and even expect) to suffer a recession in order to lower inflation.

So, I don't get why so many people predict interest rate moves based on factors that the Federal Reserve is not concerned with.

If the inflation remains high, the rate cut might not become a reality. We will see FED reducing interest rate, only if there is an actual economic slowdown where industrial output and consumer spending both are going down. Because that's when a rate cut will make sense.

The primary reason behind a rate cut is to increase money circulation in the economy. A major trigger for this, is decreasing consumer spending. If consumer spending is decreased, manufacturers will not be producing goods so the industrial output will also reduce. I don't see a rate cut is imminent but Citi Bank might have their own views.

I don't want to go off-course here, but the above post looks like it could have been AI-generated, or at least written with some help from an AI program.  The comment is not specific to the thread (except for the very last sentence) but is just a bunch of generalities and stuff that wouldn't look out of place in an economics textbook.

Christ, this is the main reason why I don't end up reading a lot of posts.  Just saying.

The use of AI is increasing and one has to crosscheck responses to avoid interaction with a bot. Identifying AI-written content is becoming difficult because users have also found means to make it look like human-generated content. However, It is better to check the text with different AI checkers to ascertain its originality because there is no consensus on the most reliable detector. I used an application called Quillbot AI detector (https://quillbot.com/ai-content-detector) and it showed that the content is 100% Human-written. ZeroGPT (https://www.zerogpt.com/#google_vignette) also confirmed that it contains 0% AI GPT and is totally Human written.

But I don't think the White House or Congress will have enough power to order the Fed to cut interest rates while inflation is still threatening the economy. The Fed is an independent organization and its decisions are based on the economic situation and are not interfered with by any other organization. I guess reducing interest rates is something the Biden administration really wants because it benefits them in the race for the White House, but it seems they can't influence it. As recently reported, Fed Chairman Powell also said he and President Biden have not had any meetings since 2022.

I have also seen some predictions that the Fed will cut interest rates this month but I think that will not happen and we need to wait until September to see if they will cut interest rates or not because they do not have a meeting taking place in August.

https://www.bloomberg.com/news/videos/2024-07-10/fed-s-powell-says-biden-hasn-t-met-with-him-in-two-years-video
https://www.talkimg.com/images/2024/07/12/oK8Y1.png

According to some news I read today, inflation in the United States is falling to 3% and is approaching its lowest levels in more than three years, which gives rise to expectations that the Federal Reserve will move to start a new cycle of reducing interest rates.

According to Investing.com, St. Louis Federal Reserve Bank President Alberto Muslim welcomed the consumer inflation report and said: The June consumer price index “indicates further progress toward reducing inflation.” The CPI report comes in a climate where “we are making progress” in returning inflation to 2%, amid growing evidence that consumers are becoming more resistant to rising prices.

It is assumed that Bitcoin and US stocks will react positively as a result of this news.

I can't open the op's link, so I'll add another source  (https://finance.yahoo.com/news/citi-fed-could-cut-interest-000000933.html)of this news. I don't know about that much of a reduction, and other predictions seem more mild for 2025.
But they are likely to lower it, as inflation is under control now. Even if they lower it a bit, it should encourage spending and investment, so the stock market is expected to have a price boost. Bitcoin doesn't perfectly correlate with the stock market, but it might get a slight positive impact from an even like this as well. Nothing big, but still good news.

No sir! I don't use AI to write my posts! I have just tried to provide my views on the situations where a rate cut may or may not happen! My entire response is related to the subject of the thread. But you are fully allowed to think otherwise. We are individuals and that's what makes us unique.

Good day to you!