The inflation growth rate in the United States has significantly declined in the past two years thus the anticipated interest rate cuts in the second half of 2024.
The United States Federal Reserve has in the past two years tightened its monetary policies in a bid to bring down inflation to a sustainable level. However, the Fed recently put a pause on consecutive rate hikes to avoid putting pressure on investors. Moreover, the Fed has observed a slowdown in new hirings coupled with the high optimism of new home buyers ahead of this year’s festivities, which is good news for the policymakers. As a result, Wall Street analysts anticipate the Fed to begin its interest rate cuts in 2024 in a bid to keep up with the shifting global economic outlook.
According to Goldman Sachs Group Inc (NYSE: GS) analysts, the Fed could begin its highly anticipated interest rate cut by the third quarter of 2024. Previously, Goldman Sachs had predicted that the Fed would begin its interest rates cut next December. The recent change in Goldman Sachs’s prediction is based on the fact that Americans paid less for gasoline amidst the smallest spike in inflation for the past two years.
“Healthy growth and labor market data suggest that insurance cuts are not imminent… But the better inflation news does suggest that normalization cuts could come a bit earlier,” Goldman Sachs economist Jan Hatzius said in a note.
The debate on US interest rate cuts has undeniably divided the Fed officials as some advocate keeping the benchmark rate high to ultimately tame the high inflation towards 2 percent. With the anticipation of two Federal rate cuts next year, the benchmark rate could drop to 4.876 percent by the end of 2024 compared to a previous forecast of 5.13 percent, according to Goldman Sachs.
Investors Buy Bitcoin Bullish Narrative
Among the notable Fed policy focus has been on the speculative crypto market that has undeniably threatened the US dollar as the global reserve currency. Already, the BRICS alliance has escalated the de-dollarization debate led by China and Russia. Meanwhile, more countries are gradually considering taking initiatives similar to El Salvador in adopting Bitcoin as the legal tender. For instance, the Central African Republic has already adopted Bitcoin as legal tender and some experts believe Argentina is moving in the same direction.
The exponential growth in Bitcoin adoption and the notable demand from institutional investors has helped the flagship cryptocurrency recently rally to this year’s high of around $44,500. Notably, more than ten fund managers in the United States have filed with the SEC to offer spot Bitcoin exchange-traded funds (ETF) led by Grayscale Investments with more than $25 billion in GBTC and BlackRock Inc (NYSE: BLK) with over $9 trillion in assets under management (AUM).