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With global financial markets experiencing a sharp decline in the last two trading sessions, all eyes turned to the FED. Last week, the FED decided to keep interest rates constant between 5.25% and 5.5%.
While industry observers predicted a 50 basis point cut at the September meeting, recent economic data and macroeconomic factors have led some experts to call for an immediate rate cut.
Jeremy Siegel, professor emeritus of finance at the Wharton School of Business at the University of Pennsylvania and chief economist at WisdomTree, called for an immediate 75 basis point cut in the federal funds rate, followed by another 75 basis point cut in September. The current federal interest rate should be between 3.5% and 4%, Siegel told CNBC.
“If they're going to be as slow on the way down as they are on the way up, which by the way was the first policy mistake in 50 years, then this is not a good time for the economy,” Siegel said.
DeVere Group's Nigel Green also reiterated the need for urgent action, advocating a 25 basis point cut to avoid a recession. “The Fed needs to act now or there could be legitimate and far-reaching risks of a hard landing,” he said in a note.
In contrast, Bitwise CIO Matt Hougan suggested a more measured approach, stating that an immediate rate cut was unlikely. “Powell is very measured and the timing of the elections makes an immediate cut unlikely,” Hougan said. “But we will probably see a 50 basis point cut in September and over 100 basis points by the end of the year. As in the last cycle, a new round of global liquidity We're entering the cycle.”
Hougan recalled the market crash on March 12, 2020, when the Dow fell 2,400 points and the price of Bitcoin fell nearly 40%. He noted that this crash turned into a historic buying opportunity, and with the intervention of central banks, Bitcoin rose more than 1,000% the next year.
*This is not investment advice.