U.S. Treasury Secretary Scott Bessent reignited the debate around interest rate cuts, sticking his tongue out to say that a 50-basis-point interest rate cut in September should be considered.
Speaking with Fox Business, Bessent was of the view that the FOMC should consider the revised job figures for May and June and the steady inflation readings before taking its next decision. July’s headline inflation stood at 2.7% year-over-year, in line with expectations.
Strong macro outlook
The treasury secretary called the inflation data ‘fantastic’ strengthening his case for easing and adding that “If we had the original numbers, we could have been cutting in June and July. … Should we get a 50-basis-point rate cut in September?”
A Reuters report showed that rates futures traders increased bets on a 25 basis point interest rate cut in September after the CPI data was released. The probability of a September cut has now risen to 98% against about 89% earlier on Tuesday, according to LSEG data.
Will cryptos continue to rally?
Global markets were quick to react, with most indices in Asia and Europe taking cues from Bessent’s statement. Crypto markets were enthused too; Ethereum surged to multi-year highs as traders anticipated more aggressive Fed easing. Bitcoin, the largest cryptocurrency, trades at $120,000 levels.
Most analysts believe that lower interest rates will make borrowing cheaper, which in turn could boost spending and investing. This could also be a chance for investors to push money toward riskier assets like crypto, where returns can be higher. Short-term optimism is high, but investors remain cautious. Options data shows continued put buying, suggesting caution despite optimism.