While Wall Street may be convinced the Federal Reserve (Fed) is about to slash interest rates, many experts argue the hard economic data says otherwise.
Meanwhile, Bitcoin (BTC) is attempting a recovery, reclaiming above the $111,000 threshold after showing weakness earlier in the week.
Why Experts Say Cutting Rates Now Could Backfire
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According to the CME FedWatch Tool, markets are pricing in a 99.6% probability that the Fed will cut rates at its September meeting.
Interest Rate Cut Probabilities. Source: CME FedWatch ToolWith barely two weeks to the next FOMC meeting, traders treat easing as a near certainty. They bet a softer policy stance will ignite another round of liquidity-driven asset rallies.
However, analysts warn that this consensus rests more on sentiment surveys than on actual economic fundamentals.
Hard Data vs. Soft Narratives
Justin D’Ercole, founder and CIO at ISO-MTS Capital Management, told TradFi media that the hard data signals the Fed should not cut rates.
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He argued that policymakers risk being swayed by a false narrative arising from soft economic surveys.
D’Ercole noted that these surveys only reflect consumer frustration with high prices but fail to capture the broader strength of the economy.
He added that available aggregate labor income is rising at a 4–5% pace, while credit card delinquencies are down year over year. Even commercial real estate, often painted as a looming crisis, shows improving asset quality and lower loan delinquencies.
Markets Want Cuts, But Data Says Otherwise Amid 2024 Echoes
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Elsewhere, Kurt S. Altrichter, founder of Ivory Hill, echoed the sentiment. In a recent post on X (Twitter), he referred to the PCE (Personal Consumption Expenditure) inflation data.
US PCE Data Since 2023. Source: Altrichter on XAltrichter argued that the risk is that the Fed will cave to market pressure at the expense of its long-term credibility in its inflation fight.
Other observers warn of financial market instability if the Fed repeats the 2024 playbook. Independent analyst Ted compared the current setup to September 2024.
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A surprise interest rate cut last year initially drove crypto markets higher before triggering a sharp reversal.
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The broader debate boils down to credibility versus relief. Cutting rates may temporarily ease pressure on indebted households and businesses. However, critics argue it risks fueling inflationary pressures, asset bubbles, and long-term instability.
With markets already celebrating a cut yet to happen, the Fed faces one of its toughest policy tests in decades, deciding whether to follow the data or the crowd.
Source: https://beincrypto.com/experts-warn-against-fed-rate-cuts/
