On September 17, a 25 basis point cut in the US Federal Reserve's key interest rate is expected. This decision has already been factored into the markets, though it raises concerns with inflation above targeted levels and slowing labor market.
Economic Signals Ahead of Fed's Decision
While the ECB maintains rates at 2%, recent economic indicators present a complex picture prior to the Fed meeting:
* Consumer Price Index rose by 0.4% in August, leading to an annual inflation rate of 2.9%.
* Producer Price Index (PPI) declined by 0.1% in August but remains at 2.6% year-on-year, while core PPI increased by 2.8%.
* Labor market: only 22,000 non-farm jobs were created in August, showing a significant slowdown, while the unemployment rate remained steady at 4.3%.
* Bond yields: 2-year yields hover around 3.56%, compared to 4.07% for 10-year, maintaining a slightly inverted curve.
Impact on Bitcoin, Gold, and Stocks
Investors are already observing the tangible results of monetary easing. Currently, Bitcoin trades around $115,880, down from its August peak near $124,000.
Gold, the classic safe haven, remains near record levels at $3,643 an ounce, while the S&P 500 and Nasdaq trade at historic highs, fueled by rate cut expectations. Risk assets like Bitcoin and stocks may benefit from sustained support if monetary policy becomes more accommodative.
Markets Prepare for Monetary Policy Changes
The probability of easing is already priced in at 93% by the markets via futures contracts. A disappointing reaction could lead to a swift correction before the impacts of a looser policy materialize. For investors, the short-term may mean volatility, while long-term prospects remain aligned with a more liquidity-friendly environment.
Amid mixed economic data and heightened expectations, the September 17 meeting appears as a crucial test for the Fed. A rate cut, as advocated by some experts, could provide enduring support to financial assets.
The situation with economic indicators and changes in monetary policy requires the Fed's careful approach. The future of financial assets such as Bitcoin, gold, and stocks heavily relies on decisions made in the upcoming meeting.
