Moody’s Analytics chief economist Mark Zandi has weighed in on the potential interest rate cuts ahead of the US Fed’s decision, sparking intense scrutiny within the crypto community regarding its potential impact on the market.

Zandi's Take: Interest Rate Cut Favorable
During an interview with Bloomberg, Zandi advocated for an interest rate cut by the Fed, citing favorable financial conditions and a stable inflation rate. He emphasized that the Fed has achieved its goal of managing inflation and suggested that waiting too long to cut interest rates could be detrimental given the current employment rate.

The Fed typically uses the Personal Consumption Expenditures (PCE) price index to gauge inflation, aiming for a 2% target rate. However, Zandi questioned whether this target is optimal, suggesting it might need to be higher. He criticized the Fed's commitment to the 2% inflation target, cautioning against sacrificing economic growth for the sake of maintaining this benchmark.

Fed’s Decision and Market Impact
The Federal Open Market Committee (FOMC) meeting scheduled for June 12-13 will play a pivotal role in determining the Fed's stance on interest rates. Despite initial expectations of a rate cut, data from The CME FedWatch Tool indicates a high probability of rates remaining unchanged, currently standing at 99.4%.

Anticipation of a rate cut had fueled optimism in the crypto market, as lower interest rates tend to boost investor confidence in risk assets like cryptocurrencies. However, revised projections now suggest a delay in rate cuts, potentially until September or November, dampening short-term bullish sentiments.

Optimism in the Crypto Market
Despite the uncertainty surrounding interest rate decisions, there are positive indicators for the crypto market. The imminent launch of Spot Ethereum ETFs later this month or early July is anticipated to stimulate market activity akin to the previous surge triggered by Spot Bitcoin ETFs.

Moreover, Spot Bitcoin ETFs are experiencing renewed demand and positive inflows, suggesting sustained investor interest. The influx of funds into both Bitcoin and Ethereum ETFs could catalyze further growth in the crypto market.

Looking Ahead
While the immediate impact of the Fed's decision remains uncertain, the potential for interest rate cuts later in the year, coupled with ongoing market developments, suggests a positive outlook for the crypto market. The market sentiment is likely to turn more bullish if rate cuts materialize as predicted, further fueling optimism among investors.