Tom Lee – Managing Partner and the Head of Research at Fundstrat Global Advisors – believes there is an 80% chance that the US Federal Reserve will pivot from its aggressive interest rate hike policy. He suggested that the main reason behind such a decision could be the positive CPI numbers which recently showed that inflation in America has slowed down its spread.
Numerous experts have argued that the end of the Fed’s anti-inflationary program could potentially catalyze a new rally of the crypto market, specifically bitcoin.
In a recent interview for CNBC, Lee pointed out the latest inflation report in America, calling it “very good.” He thinks the numbers will further fall in the next following months, resulting in a revival for financial markets.
“I think as people peel the onion, this was a very good inflation report because it’s setting up for the next two months to see inflation slowing even further.”
The American investor believes this is an appropriate timing for the Federal Reserve to stop raising interest rates. The US central bank lifted the benchmark 11 times between March 2020 and July 2023 to tackle the economic crisis caused by the COVID-19 pandemic and other setbacks.
“I was originally in the 60% chance that July was the last hike. I think it’s now in the 80% range, I think that the Fed is done hiking for this cycle,” Lee said.
In addition, Fundstrat’s analyst forecasted that the Federal Reserve will even start cutting interest rates at the beginning of 2024 because a high benchmark could hurt America’s economy (assuming that inflation keeps slowing its pace):
“Most people believe it’s the second half because the Fed doesn’t want to tighten rates, but if inflation’s falling, they have to cut rates. Otherwise, it’s actually stricting the economy more.”
Some people have suggested that a possible pivot from the Fed could make investors turn their attention toward riskier assets, such as cryptocurrencies.
One example is Galaxy Digital’s CEO – Mike Novogratz – who predicted that bitcoin will “go to the moon” once the financial institution ceases the interest rate hike policy.
Anthony Scaramucci – the Founder of SkyBridge Capital and former White House official – shares the same stance.
“I do believe that the Fed declares victory at 4% to 5% inflation. If I’m right, there will be a resurgence in the market. There’ll be a lot of short covering in crypto, and there’ll be a rebirth of risk assets,” he said earlier this year.
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