Two Fed Governors Break Ranks, Call for an Immediate Rate Cut

US President Donald Trump has once again intensified public pressure on Fed Chair Jerome Powell to aggressively cut interest rates. Last week, he visited the central bank’s HQ and even toured the Fed’s $2.5 billion renovation site, although Trump claimed that the price had jumped to over $3 billion due to increased restoration costs.

The Fed subsequently justified the project, pointing to the aging, almost century-old infrastructure, the necessity of removing hazardous materials, and escalating construction expenses. Also, Powell disputed Trump’s higher figure due to the US President including a previously completed renovation from five years ago.

Still, after the visit and meeting with Powell, Trump said the former may be ready to lower rates, citing inflation having cooled and other central banks easing policy. Though he criticized policymakers harshly, Trump reaffirmed he would not fire Powell as long as rate cuts happen.

At the start of this month, at the Sintra conference, Powell said the Fed is still monitoring data and will decide interest rates on a meeting-by-meeting basis, not committing to a July cut but not ruling it out either. Considering we’re nearing the end of it, cuts aren’t likely to happen this month.

Intriguingly, the internal dissent in the Fed has grown, where Governors Waller and Bowman (both are on the Fed’s Board of Governors) are openly advocating for a cut as soon as this month, which marks the first dual dissent in three decades.

Why this matters for crypto

When it comes to the crypto industry, lower interest rates could strengthen risk appetite, reducing the discount rate for digital assets and boosting valuations. Plus, political pressure, especially from Trump, introduces an additional layer of unpredictability to crypto markets and discussions surrounding the Federal Reserve’s autonomy and overall market stability.

Alternatively, the Fed’s hesitation could signal tougher conditions for digital assets.

However, lower rates typically weaken the US dollar because investors chase higher returns in non-USD assets. Also, foreign capital becomes less interested in dollar-denominated bonds.

Due to this, a weaker dollar tends to boost Bitcoin and other cryptocurrencies. In these situations, people often see Bitcoin as digital gold, something that they can put their money on when the traditional currencies aren’t doing well.

In addition, when the dollar isn’t as strong, local currencies from other countries get more buying power, which means they can buy more crypto, thus encouraging more people worldwide to invest.