As the Federal Reserve approaches its September 18th meeting, market sentiment has shifted, with traders now predicting a 50 basis point (bp) rate cut.

The shift in expectations follows economic data suggesting that the central bank may need to ease monetary policy to manage inflation and stimulate growth. Currently, the Fed’s target interest rate stands at 525-550 basis points (bps), and there is increasing anticipation that it could be lowered to the 475-500 bps range​.

According to the CME Group’s FedWatch Tool, there is a 52% probability that the Federal Reserve will lower the target rate by 50 basis points during the meeting. The other 48% of traders expect a smaller cut of 25 basis points, bringing the target range to 500-525 bps​.

This potential rate cut is significant for markets, particularly for cryptocurrencies like Bitcoin. Lower interest rates generally encourage more risk-taking, as investors search for higher yields outside traditional bonds or savings accounts. As a result, Bitcoin and other digital assets may see renewed interest as traders look for alternative stores of value.

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