Interpreting the FOMC November Meeting Minutes: If the Pace of Rate Cuts Slows Down, It May Postpone the Bitcoin Bull Run

Original Article Title: "Federal Reserve November FOMC Meeting: Pace of Rate Cuts Could Slow Down or Pause, Neutral Rate Outlook"

Original Article Author: Natalia Wu, BlockTempo

The Federal Reserve's Federal Open Market Committee (FOMC) decided to cut interest rates by one notch at its November meeting, bringing the benchmark rate to the 4.50%-4.75% range. Last night (26), the Fed officially released the minutes of the November FOMC meeting. At that time, Fed officials stated that they believed inflation was easing, the risks of a significant slowdown in the economy and labor market had diminished, and therefore supported further rate cuts in the future.

However, they also emphasized a cautious approach, stating that they would "gradually" cut rates based on data, and if inflation data did not meet expectations, the pace of rate cuts could slow down or even pause.

"In discussing the outlook for monetary policy, participants expected that if data were broadly consistent with their outlook for moderate growth, a continued decline in inflation to around 2%, and a still-strong labor market, then a moderate approach to adjusting policy would likely be appropriate."

However, some analysts believe that the Fed's slowing down of rate cuts after the Trump re-election rally profit-taking may delay the peak of the Bitcoin bull market.

Will the Fed's Rate Cut Pace Slow Down?

The meeting minutes also revealed that in this month's meeting, 19 officials unanimously agreed to cut rates by one notch. Some officials believed that the upside risks to inflation had hardly changed, while the downside risks to economic activity or the labor market had diminished.

Some officials also pointed out that monetary policy needs to balance the risks of easing policy too quickly or too slowly, with a rapid easing possibly hindering further inflation mitigation, and a slow one potentially overly weakening the economy and employment. Some participants indicated that if inflation remained persistently high, the FOMC might "pause" its policy rate cuts and keep them at a restrictive level.

Furthermore, many officials also believe that the uncertainty surrounding the so-called neutral interest rate level has made the assessment of the degree of policy restriction more complex. The neutral rate refers to the policy level that neither restrains nor stimulates economic growth.

Officials' estimates of the neutral rate have been rising over the past year. Chicago Federal Reserve Bank President Goolsbee said on Tuesday that his forecast for the neutral rate is close to the median estimate from the Fed's September dot plot, which is 2.9%.

Fed Officials Support December Rate Cut

The Fed will hold its December FOMC meeting on December 18th. Goolsbee predicted this week that the Fed would continue to cut rates, taking a stance of "neither restricting nor promoting economic activity" and stating, "Unless there is some compelling evidence of economic overheating, I see no reason not to continue lowering the federal funds rate."

Last week, he reiterated his support for further interest rate cuts and expressed an open-minded stance toward acting at a slower pace.

On the same day, Neel Kashkari, president of the Minneapolis Federal Reserve Bank, also known as the hawk king, explicitly supported the Fed's interest rate cut in December, stating that considering another rate cut in December was still reasonable for the central bank.

“As of today, as far as I know, we are still considering a 25 basis point rate cut in December—this is a reasonable debate for us.”

FedWatch: Over 60% Probability of Interest Rate Cut in December

However, given the ongoing economic resilience of the United States and recent strong inflation data, several Fed officials have urged caution in future rate cuts. Fed Chairman Powell also hinted at a hawkish stance in mid-November, suggesting that officials would be “cautious” about rate cuts.

“The economy has not shown any signal that urgently requires a rate cut, and the better economic conditions give us the ability to act cautiously when making decisions.”

Powell's hawkish signal also sharply reduced market expectations for another rate cut in December. However, after the release of the FOMC meeting minutes yesterday, the market slightly increased its bet on another rate cut in December, rising from about 52% yesterday to the current 66.6%, with only a 33.4% probability of pausing rate cuts.

But both the market and institutions are also predicting that the Fed will slow down the pace of rate cuts next year. Nomura Securities' latest forecast indicates that the Fed will pause rate cuts at the December interest rate meeting and will only cut rates by 1 basis point each in March and June 2025; Natixis chief economist Lin Qichao stated last week that the Fed will still cut rates by 1 basis point in December this year and then cut rates by 1 basis point each in March and June next year.

Source: FedWatch Tool

Original Article Link