tl;dr
U.S. Treasury Secretary Scott Bessent suggested the Federal Reserve should consider a 50-basis-point rate cut in September due to strong inflation data and revised lower employment figures for May and June. He argued this cut could boost borrowing, spending, investment, and push investors toward hig...
U.S. Treasury Secretary Scott Bessent signaled that a 50-basis-point rate cut should be seriously considered by the Federal Reserve in September, following strong inflation data released this week. Bessent pointed to a downward revision in employment figures for May and June totaling 258,000 fewer jobs, suggesting that the Fed missed an opportunity to cut rates earlier in June and July. This downward revision came amid controversy after President Donald Trump dismissed Bureau of Labor Statistics Commissioner Erika McEntarfer, accusing the bureau of manipulating job data.
Bessent emphasized the potential impact of a half-point cut, stating it could encourage borrowing, spending, and investment while pushing investors towards higher-yielding risk assets such as cryptocurrencies. Industry experts like Ryan McMillin, CIO at Merkle Tree Capital, echoed this view, predicting such a cut would signal a “risk on” environment for 2023. Recent data revealed July headline inflation rose 2.7% year-over-year, surpassing economists’ forecasts, which helped crypto markets rally with Ethereum hitting multi-year highs.
Though a 25-basis-point rate cut appears likely in September, the Federal Reserve is still monitoring new employment and inflation data before making decisions. Past rate cut-driven rallies have benefited from ETF inflows, but external factors like trade tensions, economic uncertainty, and seasonal market trends could influence future performance. Meanwhile, options market activity points to cautious optimism among crypto investors, who continue to buy puts as a form of downside protection against potential volatility in the traditionally unpredictable third quarter.