The possibility of a sooner-than-expected interest rate cut in the United States has escalated, with assets like Bitcoin as potential beneficiaries.
The global market has been crashing extensively since President Donald Trump’s April 3 reciprocal tariff announcement. It started with the US stocks recording their worst two-day performance since the 2020 COVID-19 plummet.
Meanwhile, at the start of the Asian market on Monday, China’s stock market crashed by over 5%, its largest single-day outflow since 2008. British and German markets also receded massively, as uncertainties resonated around the global market.
While investors quiver, there might be a silver lining, especially for the American market. JPMorgan’s global head of fixed income, Bob Michele, has suggested a possible early interest rate cut from the US Federal Reserve System (Fed).
The Fed Will Cut Rate Despite Chair’s Tough Talk: JPMorgan
Speaking at a Bloomberg appearance, Michele noted that it does not seem like business as usual in the US stock market, a view Fed Chair Jerome Powell seems unwilling to accept. The JPMorgan executive highlighted that last week’s Thursday and Friday crashes have happened only four times in America’s history.
The first three occasions were the 1987 stock market crash, the 2008 global financial crisis, and the 2020 lockdown. Interestingly, he stated that the US central bank immediately stepped in and slashed funding rates in all three events.
As a result, Michele expects the Fed to take a similar approach following last week’s steep market decline. The expert suggested that against Powell’s tough talk on Friday, the central bank may not last until its next FOMC meeting in May before it “sizably” cuts rates.
Meanwhile, the Fed chair took a circumspect approach in a Friday meeting at Arlington, Virginia, stating that the agency would not be in a hurry to cut rates. He noted that the central bank would observe the extent of the tariff impact and decide what to do next in relation to its inflation goals.
Notably, Michele is not alone in his call for an imminent rate cut; Trump had earlier nudged the Fed to slash funding rates. The pro-Bitcoin president noted that the central bank would be “better off” taking the approach.
Impact of Interest Rate Slash on Bitcoin’s Price
The pioneering cryptocurrency has corrected a staggering 8% in the past two days, imploding in the face of the burgeoning global market’s sideways trend. Nonetheless, quantitative easing would positively impact its price considerably.
Interest rate cuts reduce the cost of borrowing, encouraging investors to amass more capital through debt instruments. This, in turn, increases appetite to dabble in a broader range of investment vehicles, including cryptocurrencies.
Applying simple economics, growing demand at a constant supply would spur a surge in Bitcoin’s price. This simple analogy has historically fueled a Bitcoin price outburst, as seen in September and December 2024, when the Fed last slashed interest rates.
Meanwhile, BitMEX co-founder Arthur Hayes shares a similar sentiment, noting that the imminent funding rate slash would initiate a Bitcoin parabolic expansion, with $250,000 its target before the year’s end.
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