The Beige Book Fuels Optimism for Fed Rate Cuts in November and December
Hopes for quarter-point rate cuts by the Federal Reserve in the last two months of the year received a boost following the release of the latest Beige Book. This economic report has also paused the rally in the U.S. Dollar Index (DXY), potentially paving the way for Bitcoin (BTC) to recover.
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Bitcoin (BTC) has bounced back above $67,000 after the Federal Reserve’s Beige Book painted a mixed picture of U.S. economic conditions. Released Wednesday, the report portrayed a subdued economic outlook, reinforcing expectations for further rate reductions.
According to the Beige Book, nine out of the twelve Federal Reserve districts reported flat or slightly weaker economic activity since early September. Key sectors such as manufacturing showed signs of decline, and consumer demand appeared to cool. While prices and inflation showed some moderation, they continued to increase modestly in most areas. Employment growth remained limited, with hiring mainly focusing on replacing existing workers rather than expansion. Additionally, several districts indicated a slowdown in wage growth.
Overall, the report contrasts with the stronger-than-expected jobs data from September, which had previously dampened rate cut expectations. However, the Beige Book’s sluggish economic outlook strengthens the case for additional Fed cuts in the coming months.
At the time of writing, Bitcoin recovered from its overnight low of $65,200, rising 1% to trade at $67,300. Meanwhile, the dollar index (DXY) has pulled back to 104.30 after reaching a high of 104.57 earlier in the day, as per TradingView data.
“The Beige Book comments grabbed market attention and reinforced the belief that a 25 basis point rate cut is likely in November, with a strong possibility of another in December. This shift triggered a broad pullback in the dollar,” noted ForexLive in a recent blog post.
Several Federal Reserve officials, including Chair Jerome Powell, referenced the Beige Book’s downbeat outlook as part of their rationale for cutting the benchmark interest rate by 50 basis points in September, bringing it down to the 4.75%-5% range.
Market expectations quickly adjusted, pricing in a potential 75 basis point reduction by the end of the year. However, this optimism was tempered by stronger-than-expected job numbers and inflation data from September.
8:10 UTC Update: The overnight low for Bitcoin has been corrected to $65,200.
Edited by Parikshit Mishra.
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