Fed Historic Rate Cut In Years, More Easing On The Horizon!

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• Bitcoin (BTCUSD) soared past $65,000 as the crypto market celebrated the Fed’s first rate cut in four years. The Fed's prolonged battle against inflation had previously driven rates to a 23-year high. The September cut, the first of this cycle, renewed investor confidence in Bitcoin. While a rate reduction was anticipated, the unexpectedly large cut fueled bullish sentiment and triggered significant trading volatility.

On September 18, the Federal Reserve implemented its first interest rate cut since the early stages of the Covid pandemic, reducing benchmark rates by half a percentage point to counter a potential labor market slowdown. With both employment and inflation showing signs of weakening, the Federal Open Market Committee opted to lower the key overnight borrowing rate by 50 basis points, aligning with recent market expectations that had shifted towards a larger reduction. This move brings the federal funds rate down to a range of 4.75% to 5%. Although this rate directly influences short-term borrowing costs for banks, it also affects various consumer financial products, including mortgages, auto loans, and credit cards.

Along with the rate cut, the committee signaled through its “dot plot” projections that an additional 50 basis points of cuts are likely by year-end, aligning closely with market expectations. The collective outlook from individual officials suggests a total reduction of one percentage point by the end of 2025 and an additional half-point decrease in 2026. Overall, the dot plot indicates that the benchmark rate is expected to decline by around 2 percentage points from the level set on Wednesday.

Financial markets experienced a surge in trading activity across various sectors. At the time of writing, gold continue to receive huge demand and reached an all-time high of $2,662.00. The equities market also celebrated significant milestones, with the Dow Jones breaking above 42,000 for the first time and the S&P 500 surpassing 5,700, both setting new record highs.

With financial markets anticipating further rate cuts by the central bank to around 4.00%-4.25% by year-end and the possibility of additional reductions in 2025, the U.S. dollar is likely to remain under pressure in the coming months. This continued dollar weakness is expected to benefit safe-haven assets such as cryptocurrencies and gold, which could potentially surge past the $3,000 mark in the near future.

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