Goldman Sachs Predicts First Fed Rate Cut in Q3 2024

• Goldman Sachs Updates Federal Reserve Interest-Rate Cut Prediction
• Impact on the Cryptocurrency Market
• Current Fed's Benchmark Interest Rate
• Federal Reserve's Monetary Tightening Cycle

Goldman Sachs Updates Federal Reserve Interest-Rate Cut Prediction

Goldman Sachs, the leading investment banking firm, has revised its forecast for the Federal Reserve's initial interest rate cut. The new prediction places the interest rate reduction in the third quarter of 2024, ahead of the previously predicted fourth quarter, according to the report from Reuters on Monday.

Impact on the Cryptocurrency Market

This modification comes at a time when Bitcoin$42,260 -0.64% (BTC) and the broader cryptocurrency market have witnessed significant surges, influenced by anticipation of a potential spot ETF launch in the U.S., the upcoming Bitcoin mining reward halving, and a decrease in the 10-year U.S. Treasury yield, often referred to as the risk-free rate.

Current Fed's Benchmark Interest Rate

The Federal Reserve's current benchmark interest rate ranges between 5.25% and 5.5%. Traders of Federal funds futures are projecting a drop to 4% or lower by the end of next year. The lowering of interest rates encourages risk-taking in the economy and the financial markets, including cryptocurrencies, by making borrowing less expensive. However, a swift rise in rates, as seen in 2022, has the opposite effect.

Federal Reserve's Monetary Tightening Cycle

The Federal Reserve began its monetary tightening cycle in March 2022 as an attempt to curb inflation. The interest rates, which were as low as 0%-0.25%, have been raised, with the most recent increment taking place in July. The quick uptick in borrowing costs negatively affected risk assets, including cryptocurrencies, last year.

Edited by Jonathan Stoker