Federal Reserve policy expectations are taking center stage as two major financial institutions issued assessments that frame a cautious but potentially supportive backdrop for risk assets, including cryptocurrencies.
According to UOB Group economists, the US economy remains resilient and the central bank is likely to continue its gradual easing cycle. UOB projects a 25-basis-point rate cut at the December Federal Open Market Committee meeting, with additional reductions expected in the first half of 2025. The outlook rests on the Fed's dual mandate of maximum employment and price stability, with inflation gradually trending toward the 2% target.
Commerzbank, meanwhile, points to mixed signals from the US labor market. Recent non-farm payrolls data show a clear slowdown in hiring, while wage growth remains sticky and the unemployment rate has ticked down. This combination creates a dilemma for the Fed, because a weakening labor market could justify a pause or faster easing, whereas persistent wage pressure could keep inflation elevated and rates higher for longer. As a result, Commerzbank analysts see no clear directional signal for the US dollar and expect it to remain range-bound until a clearer trend emerges.
Market implications are significant. UOB's view aligns with a shift from a 'higher-for-longer' narrative toward 'gradual normalisation,' which may support risk assets. Lower borrowing costs could translate into reduced mortgage rates and cheaper corporate financing, although savers may see lower deposit yields. For crypto markets, a more accommodative Federal Reserve typically improves liquidity conditions and risk appetite, though the data-dependent approach means inflation or employment surprises could quickly alter the trajectory.
