The Fed may cut interest rates again? The Beige Book suggests a slowing economy, and BTC is expected to return to glory

Increasing signs of economic slowdown

The latest 'Beige Book' report released by the Federal Reserve System (Fed) shows that since early September, there has been little significant change in economic activity in nearly all 12 Federal Reserve Districts, with only two districts reporting moderate growth. Overall, nine districts reported either stagnant or modest growth, with manufacturing activity generally declining and consumer demand showing a cooling trend. The report also points out that as consumers become more price-sensitive, consumer behavior is shifting towards lower-priced alternatives, further squeezing corporate profits.

In the labor market, although there has been a slight increase in new job opportunities, recruitment activities are mainly focused on filling vacancies rather than creating new positions. In addition, wage growth has slowed in most regions, with overall labor demand decreasing, indicating concerns among enterprises about the uncertainty of the economic outlook, especially with the potential policy changes brought by the upcoming U.S. presidential election.

The brown book triggers expectations of interest rate cuts, and BTC returns to the rise track.

Influenced by the Brown Book report, the market expects the Federal Reserve to further cut interest rates in the coming months. Despite stronger-than-expected employment data in September and inflation reports showing pressure on prices, Fed officials pointed out signs of economic slowdown, which undoubtedly paved the way for rate cuts. Federal Reserve Chairman Jerome Powell previously listed the dim outlook of the Brown Book as one of the reasons for a 50 basis point rate cut to 4.75%-5% in September. Subsequently, market expectations for a further 75 basis point rate cut before the end of the year have also been gradually strengthening.

With the expectation of rate cuts heating up, the US Dollar Index (DXY) fell from 104.59 to 104.07, further pushing up the price of BTC. As of the time of reporting, BTC has rebounded 1% from the daily low, reaching $67,735. Market analysis platform ForexLive pointed out that the negative sentiment of the brown book has led the market to generally believe that the 25 basis point rate cut in November is a foregone conclusion, and there is even the possibility of another rate cut in December. According to CME FedWatch tool, the market expects a 97% probability of the Fed cutting rates by 1 basis point (25 basis points) in November.

Source: CME FedWatch Market predicts a skyrocketing 97% probability of a 25 basis point interest rate cut in November.

Consumer Behavior Changes and Future Economic Challenges

The brown book also pointed out that there has been a significant shift in consumer behavior, with many areas reporting consumers more inclined to choose alternative products with lower prices, further indicating concerns about the economic outlook. According to reports from the Philadelphia area, although retailers have increased promotional activities to attract customer traffic, sales continue to decline. The New York area pointed out that although department stores have seen slight growth in sales in recent weeks, consumers are more focused on quality rather than quantity, especially in accessories such as handbags and shoes.

In the real estate market, the report shows that commercial real estate activities are generally stable, with signs of activity in some areas such as data centers and infrastructure projects, but office leasing demand remains sluggish. These reports indicate the instability of the US economy and strengthen the possibility of further relaxation of monetary policy by the Federal Reserve.

Can the upward trend of BTC continue?

Supported by the slowdown in the US economy and expectations of interest rate cuts, the cryptocurrency market, especially BTC, is once again showing a rising trend. With the weakening of the US dollar, the attractiveness of safe-haven assets such as BTC has increased. However, the future price trend still depends on the Federal Reserve's policy direction and the performance of the global economy. If the Federal Reserve continues to cut interest rates, BTC may receive greater support when investors seek safe-haven assets. However, if US economic data improves again, the market's demand for safe-haven assets may weaken, and the price of BTC may fall.

With the continued uncertainty of the US presidential election and economic policies, the economic slowdown depicted in the brown paper is undoubtedly providing more volatility to the market and may further drive BTC and other encryption assets to become the focus of investor capital inflows.

【Disclaimer】There are risks in the market, and investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at your own risk.