Interest rate cuts are a bullish catalyst for crypto prices, as investors increase their risk appetite during times of credit expansion.
Several financial institutions and market analysts are now projecting the US Federal Reserve, the country’s central bank, will slash interest rates from the current target rate of 4.25%-4.5% at least twice in 2025.
The banking forecasts followed a weak August jobs report that saw only 22,000 jobs added for the month, versus expectations of about 75,000.
Analysts at Bank of America, a banking and financial services company, reversed their long-held stance of no rate cuts in 2025 and are now projecting two 25 basis point (BPS) cuts, one in September and another in December, according to Bloomberg.
Economists at Investment banking firm Goldman Sachs are projecting three 25 BPS cuts in 2025, beginning in September and continuing throughout October and November.
Banking giant Citigroup likewise forecasts a total 75 BPS cut in 2025, spaced out in 25 BPS increments in September, October and December, Reuters reported.
Over 88% of traders now expect a rate cut of 25 BPS at the next Federal Open Market Committee (FOMC) Meeting in September, and about 12% of traders expect a 50 BPS cut, according to data from the Chicago Mercantile Exchange (CME) Group.
Lower interest rates drive liquidity into crypto markets and are seen as a major catalyst for rising crypto prices and sustained bull runs, with higher rates having the opposite effect on asset prices.
Related: Bitcoin breaks out, but weak US jobs data breaks bulls again: Time to risk on or off?
Most traders now anticipate rate cuts amid massive job numbers revisions
Federal Reserve Chair Jerome Powell signaled a potential rate cut in September during his keynote speech at the Jackson Hole Economic Symposium in Wyoming on August 22.
The speech came amid signs of a weakening US jobs market, which is part of the Federal Reserve’s dual mandate of achieving maximum employment and keeping prices stable.
“The US just revised the June jobs report lower for a second time, for a total of -160,000 jobs. Now, the US has officially lost 13,000 jobs in June,” the Kobeissi Letter said in a post on X.
The Kobeissi Letter also warned that the US Bureau of Labor Statistics (BLS) revised 2024 job numbers downward by about 818,000, and may revise 2025 figures down by as much as 950,000 jobs.
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