U.S. Treasury Urges 50bps Fed Rate Cut in September as Crypto Market Rallies

U.S. Treasury Secretary Scott Bessent called for the Federal Reserve to consider a 50-basis-point rate cut in September, citing recent weak employment data and soft inflation readings as justification. Bessent emphasized that downward revisions to May and June employment figures, which collectively reduced the number of jobs by 258,000, should signal a reevaluation of monetary policy. “If we had the original numbers, we could have been cutting in June and July,” Bessent stated in an interview with Fox Business, noting that a 50bps cut is now “on the table” [1].

July’s headline inflation rose 2.7% year-over-year, slightly higher than expected, but still supportive of looser monetary policy. This data, along with downward revisions to jobs figures, has increased market expectations for a more aggressive easing move [1]. Lower interest rates typically reduce borrowing costs, stimulate spending and investment, and encourage capital flows into higher-risk, higher-yielding assets such as cryptocurrencies [1].

The crypto market responded swiftly to the prospect of a rate cut, with Ethereum reaching multi-year highs and other blue-chip tokens showing significant gains. Ryan McMillin, chief investment officer at crypto fund manager Merkle Tree Capital, noted that a 50bps cut would “confirm risk on for the rest of the year,” reinforcing the bullish sentiment among crypto investors [1]. While a 25bps cut in September is already seen as a near certainty, the possibility of a larger cut has added momentum to the market rally [1].

However, the Fed still faces a new round of employment and inflation data before its September meeting, which could influence its final decision. Despite the current optimism, crypto investors remain cautious, with options trading reflecting a focus on downside protection. Traders continue to buy puts, signaling a desire for hedging against potential volatility. Meanwhile, past crypto rallies have been supported by inflows from exchange-traded funds, though macroeconomic uncertainties and seasonal trends may affect the market’s trajectory [1].

The call for a larger rate cut aligns with broader expectations for continued easing, which could further support risk-on sentiment and asset classes like crypto. Nevertheless, the path forward remains subject to the Fed’s assessment of incoming data and its evolving policy framework.

Source: [1] What Treasury Secretary Bessent’s Call for a 50bps Cut in September Could Mean for Crypto (https://decrypt.co/334897/bessent-50bps-cut-september-mean-for-crypto)