Fed Rate Cuts Fuel Year-End Stock & Crypto Rally Hopes

- Fed Cuts Interest Rate by 0.25 Percentage Points for the Second Time in a Row - Tech Stocks Respond, Nasdaq Index Rises by 1.5% [Unblock Media] The United States Federal Reserve has enacted a second consecutive interest rate cut, slightly easing the pace of monetary policy adjustments. This rate cut by the Fed is 0.25 percentage points, adjusting the benchmark interest rate to a range of 4.50%-4.75%. This benchmark rate sets the interest rates for overnight loans between banks and influences consumer debt products such as mortgages, credit cards, and car loans. The rate cut was a predicted move, and Fed policymakers had signaled it multiple times. Notably, this decision passed unanimously, contrasting with the previous rate cut, which had one dissenting voice. The stock market responded positively after the rate cut. Particularly, the tech-heavy Nasdaq index rose by 1.5%, making it the largest gainer among the major indices. This reflects expectations that lower interest rates would allow tech companies to attract more investment. The Nasdaq, S&P 500 indices, and Bitcoin all hit record highs, while Treasury yields fell following the previous day's sharp rise. According to 'CNBC,' the Fed’s rate cut could lead to increased investment in digital assets like Bitcoin. This is because investors seek high-yield assets when traditional yields decrease. The Fed’s statement indicated some changes in economic assessment. Specifically, efforts to support the labor market while reducing inflation are now seen to be balanced. This is a change from the "greater confidence" expressed in September. 'Coindesk' reported that major cryptocurrencies like Bitcoin are being noticed as alternative assets that maintain value in inflationary conditions, a role likely to be strengthened by the Fed's rate cut. Fed officials cited employment support becoming as important a priority as curbing inflation for the policy easing. The job market has slightly eased, and although the unemployment rate has risen, it remains low. The economic assessment still mentions "solid growth." Fed Chair Jerome Powell stated that policy readjustments aim to help the economy and labor market remain strong while inflation neutralizes. However, there is uncertainty about how much more rate cuts may be necessary. The U.S. GDP grew at an annual rate of 2.8% in the third quarter, with a fourth-quarter estimate of 2.4%. Overall, the labor market remains stable, though nonfarm employment increased by 12,000 in October. This was weakened due to storms in the Southeast and labor strikes. Political background changes are also noted. President-elect Donald Trump's policies are expected to challenge inflation. Trump has criticized the central bank, with Powell's term running until early 2026. It's important to observe how Powell will respond to potential threats to the Fed's independence posed by Trump's policies. There is ongoing discussion about the pace of future rate cuts. Traders expect the Fed to make another rate cut in December, seeing that the Fed needs more time to adjust to economic growth and inflation. Traders anticipate another 0.25 percentage point rate cut in December, followed by a pause in January to evaluate the impact of these policies. Despite the Fed's rate cuts, the bond market has not reacted accordingly. Treasury yields have risen, and the 30-year mortgage rate has also increased to 6.8%. The Fed's goal is to achieve a "soft landing," reducing inflation while avoiding a recession. The current inflation rate is 2.1% on a 12-month basis, with core inflation, excluding food and energy, at 2.7%.