Amid declining market sentiment and a weak crypto market, only 45.9% of investors expect an interest rate cut at the next US Federal Open Market Committee (FOMC) meeting in December.
The probability of a 25 basis point (BPS) rate cut in December was nearly 67% as of Nov. 7, according to data from the Chicago Mercantile Exchange (CME) Group.
In September, multiple banking institutions predicted at least two rate cuts in 2025, with market analysts at investment bank Goldman Sachs and banking giant Citigroup each predicting three 25 basis points cuts in 2025.
Interest rate probability. sauce: CME Group
Interest rate decisions affect the price of virtual currencies. Lower interest rates will allow more liquidity to flow into asset markets, supporting prices, while rising interest rates will limit liquidity and prices.
The lower probability of a December rate cut is negatively impacting market sentiment and could signal more near-term price pain for the crypto market until the Federal Reserve resumes rate cuts.
Related: Stablecoin demand is growing and could push interest rates down: Fed’s Millan
Fed’s Jerome Powell questions December interest rate cut
“There were very different views on how to proceed in December,” Federal Reserve Chairman Jerome Powell said in October. “Further cuts in interest rates at the December meeting are not a foregone conclusion, far from a conclusion. Policy is not in a predetermined direction.”
As expected, the Fed cut interest rates by 25 bps in October. However, cryptocurrency prices widened their decline due to interest rate cuts.
The hemorrhaging in the cryptocurrency market continues, with the fall even wider in October. sauce: TradingView
Investors were “fully pricing in” an October rate cut, said Matt Mena, a market analyst at investment firm 21Shares, who had been widely expecting a rate cut for months.
Economist and former hedge fund manager Ray Dalio warned that the Federal Reserve is cutting interest rates to record high asset prices, relatively low unemployment and low credit spreads, calling it a historic anomaly.
Dalio said in November that the Federal Reserve is likely steering the economy into a bubble, adding that this is a typical feature of a debt-laden economy headed for hyperinflation and currency collapse.
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