Simon Peters, eToro analyst
Cryptocurrency markets rose 10% last week, driven by the US Federal Reserve’s 50 basis point cut in interest rates, the Fed’s first rate cut in four years.
The federal funds rate was lowered from a target range of 5.25%-5.50% to 4.75%-5.00% in response to progress toward the Fed’s 2% inflation target since its last meeting in July.
Bitcoin saw a 6% rise, reaching $64,000, a price level not seen since August 26 of this year. Spot bitcoin ETFs also saw inflows worth $412 million last week.
Interestingly, the published dot plot, which illustrates the Fed’s estimates for long-term interest rates, showed that officials expect the federal funds rate to stand at a target range of 4.25%-4.50% by year-end, 50 basis points below the current target range. This suggests that further rate cuts could come at the Fed’s November and December meetings.
According to CME FedWatch, the market is currently forecasting a target range for the federal funds rate of 4.00%-4.25% by year-end, which would imply a 75 basis point reduction from current levels.
Attention will be focused on Friday’s Personal Consumption Expenditures (PCE) Index inflation data. The PCE is the Fed’s preferred measure of inflation. A lower-than-expected figure could further boost markets in anticipation of even deeper interest rate cuts in the coming months.
