Following rate cuts by major central banks, such as the European Central Bank’s reduction from 4% to 3.75% last week, U.S. Senators Elizabeth Warren, Jacky Rosen, and John Hickenlooper wrote a letter to Federal Reserve Chair Jerome Powell urging for a similar reduction in the federal funds’ interest rates to ease the financial strain on working Americans.
Senators Call for Rate Cut
Since March 2022, the Federal Reserve has raised interest rates eleven times, leading to the highest levels in over 20 years. Despite growing calls for rate cuts from various sectors, the Fed has maintained its stance, causing concerns about further economic strain.
Yesterday, a letter from the three Democrat senators criticized the Federal Reserve for maintaining high interest rates for an extended period which currently stand at a two-decade high of 5.5%.
The senators argue that the high interest rates are worsening economic problems by raising the costs of housing, construction, and auto insurance. They warn that if these rates remain high, the economy could enter a recession, leading to significant job losses.
Comparison to Global Central Banks
The senators highlighted the actions of other central banks, such as the ECB and the Bank of Canada, which have recently cut rates. They suggest that the Fed should follow suit and reconsider its 2% inflation target.
According to the letter, failing to align with these global trends could lead to a weakening dollar and tighter financial conditions, potentially slowing down economic growth. Even though, banking giant JPMorgan has also noted that higher interest rates are driving up rents in the U.S.
Impact on Cryptocurrency
The senators’ appeal for lower interest rates could have significant implications for the cryptocurrency market. Lower rates would weaken U.S. Treasury yields, making riskier assets like cryptocurrencies more attractive to investors.
Currently, Bitcoin is experiencing a correction phase, trading more than 7% lower than its all-time high of $73,700, now hovering at $67,300. This trend has also affected other cryptocurrencies such as Ethereum, Solana, and Cardano, which have seen substantial price drops.
