While the Fed held rates at 4.5% this week, YouHodler’s head of risk, Sergei Gorev, doesn’t expect that to last much longer.
Gorev said the decision is neutral for the market as it is within expectations. While the market initially perceived Trump’s assumption of office as a positive factor, his actions have created uncertainty.
“Since Trump strongly recommended lowering the interest rate, it has helped American businesses,” Gorev said. “The uncertainty due to Trump’s new tariffs makes it difficult for the Fed to determine interest rates.”
“The market is waiting for more precise signals for a rate cut, which is still hampered by the somewhat opaque situation with duties and how this may subsequently affect the markets. In the current situation, the market expects inflation to rise in the next 12 months against the backdrop of Trump’s current trade policy.”
Gorev sees more signs in the markets that the Fed will gradually have to lower the interest rate in the medium term. The March correction of the S&P 500 index was the seventh-fastest decline since 1929, during the Great Depression. The S&P 500 has fallen 10% since February, fully entering a technical correction. ETH has reached a five-year low against BTC. Thus, the situation on the stock markets is already hinting to the Fed leadership that it would be time to start lowering the rate, at least in 2025, as it is becoming more and more difficult to grow further.
“There are also signs of high interest rate pressures in the real economy,” Gorev observed. “In February, there was a sharp drop in retail sales in restaurants and bars in the United States. The real sector of the US economy will gradually have to make it more challenging to do business at current interest rates.”
“We believe the Fed will decide to lower the rate in 2025. Because in addition to the virtual stock market, the real sector of the economy is already crying out for a rate cut. The sooner the US Federal Reserve starts this process, the easier and more painless the consequences will be.”