The End of the Federal Reserve’s Tightening Cycle
Key Points:
- The Federal Reserve has ended its aggressive interest rate hike cycle.
- The Fed raised its benchmark fed-funds rate to the 5.25%-5.5% range.
- ING Chief International Economist James Knightley believes the Fed will not hike interest rates again in September.
- Financial conditions have tightened due to the rise in the U.S. Dollar Index and the 10-year Treasury yield.
- Banks have tightened credit standards for commercial and industrial loans.
- The real fed-funds rate is at its highest level since 2007, suggesting restrictive economic conditions.
- The potential end of the tightening cycle does not guarantee a return to a bull market.
Hot Take:
The end of the Federal Reserve’s tightening cycle may provide some relief to the crypto market, but it does not guarantee a quick return of animal spirits. Financial conditions have tightened, and banks have tightened credit standards, indicating potential headwinds for economic growth. Additionally, central banks are unlikely to revert to the ultra-easy policies seen during the pandemic. The current backdrop of tight monetary policy and inflationary pressures may not be ideal for broad asset class returns. The crypto market should remain cautious as it navigates these uncertain times.
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