Fed Increases Assets Amid Rate Cut Predictions

The Federal Reserve's balance sheet expanded by $2 billion this week, reaching a total of $7.2 trillion.

This marks the ninth increase in a year amidst prior declines, which have been tapering off since May, possibly signaling an upcoming rate cut.

CME data points to a potential 25 basis point rate cut on September 16, supported by recent lower-than-expected inflation and PPI figures. Despite this, August retail sales were stronger than anticipated, reducing immediate recession fears.

Financial markets have largely absorbed the effects of the yen carry trade unwind from August 5, though Bitcoin remains below $60,000.

The Japanese Yen has weakened to 148 per dollar, and Japan’s GDP growth surpassed forecasts at 0.8%, possibly indicating a future rate hike by the Bank of Japan.

In contrast, the UK economy grew by 0.6% in Q2 2024, following a 0.7% increase in Q1. Coinbase UK’s CEO, Daniel Seifert, suggested that further rate cuts by the Bank of England could boost interest in cryptocurrencies and enhance regulatory alignment with global standards.