Fed Rate Cut is finally happening again after a decade. The fed rates can help in growing the supply of the money which has been kind of slow for the past few years. The Federal Reserve is expected to cut the interest rates by 25 basis points today afternoon. This change is supposed to help in the rise of the stocks according to the conventional economic wisdom.
But the past tells a different story. We’ve seen the same change in the interest rates in the past because of federal cuts, but what came afterward changed everything. In September 2007, the Federal Reserve announced a decrease of 50 points taking the rates to 4.75% from 5.25%. S&P 500 saw growth for three weeks before it crashed down, causing the Great Recession. Similarly, in 2001, the cuts in the rates lead to the S&P 500, reaching down by 13%, followed by a steeper fall of 23% in 2002.
In recent years, the GDP has expanded at a 2.1% annual rate, and unemployment has been historically low at 3.7%. These cuts in the rates are done as a counteract towards the slumping global economy. Fed Chairman Jerome Powell has hinted that these rate cuts will weaken the dollar and make export trade more attractive for foreign countries.
This is the first-ever Fed Rate Cut ever since the launch of Bitcoin took place. Cryptocurrencies have seen a backlash from the governments and the most important thing to see with these cuts would be their impact on the Bitcoin market. Stock market and Bitcoin market work independently, but with these rate cuts, we can expect some significant rise or fall in both the exchanges. Last year we noticed a drop in Bitcoin when the rate cut happened, we can expect a rise in the rates this year.