Fed Allegedly Calls Emergency Meeting Amid Global Market Turmoil

The U.S. Federal Reserve has called for an emergency meeting to address the recent dramatic downturn in global markets.

Analysts predict the Fed might cut interest rates by 50 basis points to stabilize the situation.

Global markets are in turmoil, with the Japanese yen falling 13%, Korean and Taiwanese markets down nearly 10%, and Bitcoin plunging around 25% from its recent $70K peak. Additionally, S&P futures have decreased by 4%. This instability has prompted the U.S. Fed to hold an urgent meeting.

Economists are concerned, expecting the Federal Reserve to reduce interest rates by 0.5% to mitigate further economic fallout. CNBC’s Ran Neuner highlighted the critical nature of the situation, suggesting swift Fed action is necessary to prevent a crisis comparable to or worse than 2008.

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The financial distress seems linked to the reversal of the Japanese cash and carry trade, causing global panic. The likelihood of a rate cut in September is now certain.

Historically, rate cuts have helped stabilize markets, such as during the 2007-2008 financial crisis. The Federal Reserve’s prompt response is seen as vital to curbing economic instability. However, economist Peter Schiff warns that lowering rates might lead to a recession.

Goldman Sachs has increased the chance of a U.S. recession within the next year to 25% from 15%. Despite this, they argue that the overall economy remains stable, with no major financial imbalances, and the Fed has room to cut rates if necessary.

Goldman Sachs anticipates the Fed will lower rates by 25 basis points in upcoming meetings, provided job growth recovers. However, if employment data remains weak, a 50 basis point cut might occur in September.

Potential rate cuts could influence the crypto market, making Bitcoin and other digital assets more attractive as investors seek higher returns amid lower traditional savings rates. Bitcoin is often viewed as a hedge against economic instability, potentially gaining value if aggressive rate cuts are implemented. Nonetheless, caution remains due to warnings from experts about possible economic downturns.

Alexander Stefanov