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Arthur Hayes claims Fed rate cut is politically motivated

Arthur Hayes claims Fed rate cut is politically motivated

GrafaGrafa2024/09/19 08:20
By:Mahathir Bayena

Arthur Hayes, co-founder of BitMEX, recently suggested that the Federal Reserve's latest rate cut could be politically motivated, with potential long-term impacts on inflation and financial markets.

Speaking at Token2049 in Singapore on September 18, Hayes speculated that the rate cut, which reduced interest rates by 50 basis points, may have been aimed at boosting the chances of Democratic presidential candidate Kamala Harris in the upcoming election.

“I have a macro view that Jerome Powell and Janet Yellen want to juice financial markets to help Kamala Harris win the election,” Hayes commented.

He emphasised that the move contradicts current economic indicators, such as strong GDP growth and low unemployment, arguing that making borrowing cheaper for the government may exacerbate reckless spending.

Hayes also pointed to potential consequences for both traditional and crypto markets.

He warned that inflation is likely to increase, stating, “Inflation is going to accelerate after this point.”

He explained that the rate cut could trigger an artificial boost in financial markets, leading to a false sense of wealth as voters head to the polls.

On the immediate impact of the rate cut, Hayes described the initial market reaction as calm, with crypto markets seeing a temporary gain of 4%.

However, he predicted that the real market response would likely come after the close of traditional markets on Friday.

"It’s calm before the storm," he noted, suggesting that a delayed reaction could occur over the weekend.

Looking ahead, Hayes highlighted the upcoming decision by the Bank of Japan, suggesting that a weaker yen would likely result in a stronger Bitcoin (CRYPTO:BTC) price.

However, he cautioned that a strengthening yen could put downward pressure on Bitcoin and other assets.

In a keynote speech at Token2049, Hayes criticised the Fed’s decision, labeling it a “colossal mistake” amid rising U.S. dollar issuance and increased government spending.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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