Fed Set to Announce Interest Rate Cut Amid High Market and Election Tensions

• The Fed is expected to announce a 25bps rate cut, bringing rates to 4.50% on November 7th.
• Crypto market anticipates gains as potential Fed rate cuts and U.S. election results loom.
• Analysts forecast further rate reductions by the Fed, possibly reaching 3.0% by end of 2025.

The Federal Reserve is widely expected to announce a 0.25% rate cut this week, with CME data suggesting a 98.1% probability that the Fed will lower the policy rate from 4.75% to 4.50% in the upcoming FOMC meeting on November 6-7. 

This move marks a continuation of the Fed’s rate-cutting strategy that began in September and is projected to influence various sectors, including crypto markets, which have already shown sensitivity to potential shifts in U.S. economic policy.

Market analysts are carefully eyeing the FOMC’s decision, especially with the November 5 U.S. presidential election adding uncertainty. Votes likely to be tallied by November 6 could impact market stability and shape the Fed’s rate policy over the coming months. 

According to economists, there is strong support for a gradual reduction in the federal funds rate, with projections indicating that rates could drop further to 3.0% and 3.50% by late 2025. Additionally, over 90% of economists polled by Reuters expect rates to settle in the 4.25%-4.50% range by the close of 2024.

The anticipated rate cut has sparked optimism among crypto investors who believe a rate reduction could bolster the sector. Industry leaders, including Mark Cuban, have voiced support for regulatory adjustments that align with a more crypto-friendly stance, especially if this week’s election yields a Trump victory. 

Trump’s pro-crypto policy has resonated with parts of the digital asset community, especially on topics like the potential use of U.S. dollar-pegged stablecoins in international trade. A recent Bernstein report suggests that a Trump win could significantly drive up Bitcoin prices, possibly exceeding $80,000.

Despite a weak jobs report showing minimal employment growth and a higher unemployment rate of 4.1%, the Fed appears committed to its rate-cutting plan.

Only 12,000 jobs were added in October, falling short of the projected 113,000, yet Fed officials remain focused on lowering rates, with inflation rates nearing their 2% goal. San Francisco Fed President Mary Daly and others see little to deter continued rate reductions.

Economic projections from Goldman Sachs indicate that the Fed could pursue a series of six 25bps cuts through 2025. This shift toward easing has intensified with continued price pressures, robust consumer spending, and stable job creation, as noted by Thomas Simons, senior economist at Jefferies.