#FedCutsRatesBy25Bp

The U.S. Federal Reserve has lowered the rate for the second consecutive time by 0.25%. What consequences can we expect for the market?

So, the Federal Reserve (Federal Reserve) is taking its second consecutive step toward easing monetary policy, lowering the key rate to a range of 3.75%–4.00%. This is no longer just a "test" but the start of a full cycle of rate cuts. Let’s consider what this might mean for various market sectors.

Why is this important?

A rate cut by the Fed is like turning a tap of cheap money. Loans for businesses and consumers become more accessible, stimulating investment and consumption. But every coin has two sides.

Potential benefits for the market:

1. Stock Market (stocks): The classic reaction is growth. Cheap money and low bond yields encourage investors to seek higher returns, leading them to the stock market. Sectors that could benefit include:
· Transportation companies: Improved conditions for purchasing transportation and logistics.
· Construction and real estate developers: Lower mortgage rates could revive the real estate market.
· Growth companies (IT, technology): Their future earnings are valued higher in a low-rate environment.
2. Bond Market: Prices for previously issued bonds with higher rates generally increase. However, it’s important to watch the Fed’s statements about future plans.
3. Cryptocurrencies: This asset class often behaves as a "risk-on" asset. Liquidity inflows and overall positive market sentiment can also boost the crypto sector.

Risks and "hidden pitfalls":

1. Inflation: This is the main concern. If the Fed starts cutting rates too early or aggressively, it could reignite inflation, which is not fully under control yet. In that case, the Fed might have to reverse course sharply, causing shocks in the markets.
2. Signal of economic weakness: Sometimes, market participants interpret easing as not just support but as a sign of impending economic slowdown or even recession. The question "Why are they rushing?" can trigger a wave of selling.
3. USD exchange rate (USD): Lower rates typically weaken the national currency. This benefits U.S. exports but can create tensions in global markets and hurt developing countries with dollar-denominated debt.

What’s the bottom line?

The second rate cut in a row confirms that the Fed is confidently moving toward easing. In the short term, this is a positive signal for risk assets (stocks, crypto). However, the long-term effect will depend entirely on inflation and employment data.

The key question now: how deep will this cycle of rate cuts go? If the economy remains resilient and inflation continues to decline, we might see a "soft landing" with supportive markets. But any deviation—such as a spike in inflation or a sharp slowdown—could trigger significant volatility.

And what do you think? Will the market follow this decision with a "soft landing," or are surprises ahead?