It is still early to anticipate cuts in the interest rate of the dollar

If you are waiting for interest rates to be reduced in the United States, I regret to tell you that we are still far from that possibility. The situation is not conducive to such a measure that would positively impact financial markets, including Bitcoin (BTC).

You might think that the current circumstance in the United States, where inflation is practically controlled and with good signs for the coming months; And where the labor market is just stabilizing, It is chord for an adjustment in interest rates in the short term. This, on account of promoting the economy by increasing prices and job offers.

But it is not so. These elements are not enough for a cut of interest rates in the United States. On the contrary, there are several factors that move away this possibility, thus delaying a substantial improvement in financial markets.

The main factor that delays the trimming of interest rates is the United States trade war. Although on Wednesday, June 11, an agreement between that country and China was notified to soften tensions and continue with trade between both nationsas cryptootics reported, uncertainty persists among investors.

And is that the secretary of Commerce, Howard Lutnick, clarified that US tariffs will total 55% to Chinawhile the Asian nation will impose tariffs of 10%. In fact, in a program broadcast by CNBC yesterday, the Executive said there are no plans to configure that proportion.

Sample of uncertainty in the market is that, in the middle of yesterday’s announcement, The S&P 500 stock index fell briefly, then recovered and fell again. Everything, before undertaking a recovery this Thursday, June 12, as seen in this graph:

For financial analyst Jeff Cox, this behavior is another sign that investors “are becoming cautious when taking commercial pronouncements to the letter.”

In general, the commercial war delays the cut of interest rates since the inflationary effects and the deceleration of economic growth derived from these measures They have not yet manifested fully in the American economy. In addition, the persistence of commercial tensions could increase the pressure on prices, forcing the Federal Reserve (Fed) to maintain a more restrictive monetary policy to control inflation, despite the expectations of a relief in rates.

Inflation has not increased

Indeed, the impact of the tariff war He has not yet felt in American inflation. For Sema Shah, Global Strategist Chief of Principal Asset Management, “The current inflation data is reassuring, to some extent.”

According to the most recent report by US authorities, May inflation stood at 0.1%, for an interannual accumulated 2.4%, as cryptootics reported. It was good news that even positively impacted the price of Bitcoin, which had a first upward reaction.

In fact, after knowing these inflationary results, otherwise, the United States vice president, JD Vance, wrote in X that “the Fed refusal to cut the types is a bad monetary praxis.”

Now, for analyst Shah, Inflation may increase in a few months product of the geopolitical-commercial conflict. “It is too premature to assume that the pricing clash will not materialize,” he said, thus predicting an important impact on the pocket of Americans in the coming months as a result of the tariff conflict.

This scenario will most likely delay the cut in interest rates, because the Fed prioritizes controlling inflation on stimulating the economy, keeping high rates to avoid a price over. And since there is no impact yet, they prefer to keep their caution, leaving them as they are: 4.25% per year.

Debt, a monster on stalking

Another factor that moves the cut of interest rates is the debt of the US government, which remains on the USD 36 billion, as well as the threats of a recession. In May alone, the deficit reached USD 316,000 million. In addition, the fiscal deficit has shot up to USD 1.36 billion so far this year, 14% more compared to last year.

The situation of American debt, whose roof “should be completely eliminated” according to President Donald Trump, He has grow the alarms for the recession. This due to the accelerated growth of the debt of approximately 1 billion dollars per 100 days, as well as the fiscal deficit, which is projected at 6.2% of GDP this year.

This graph shows the sustained increase in US debt in the last five years:

If there was the case that the roof of the US debt was eliminated, the Treasury Department would be allowed Issue debt without legal restrictionspotentially increasing public spending. The Fed could absorb part of this debt expanding its balance (through bond purchases), which would increase the monetary base. This is an inflation generator.

A debt crisis of this magnitude, if it is not managed well, could derive in default. And that scenario for the United States, although it is unlikely, could trigger a global economic crisiswith a deep fall in American GDP and the loss of millions of jobs, just to mention some of the consequences.

It is still early

The described scenario is sufficient to understand that the Fed will postpone the cut of interest rates. Yes, it’s still early. US bankers have still to do How to face these circumstances before launching an economic incentive.

The American central bank faces a complex dilemma, and although there are positive signs, the conditions are not given to reduce the rates.

It will be seen if the circumstances improve and if the president of the Fed, Jerome Powell, finally decides to meet the estimates of interest sales for this year.

What is true is that, indifferent when I do, the cuts to interest rates in the United States They would bring goodbye to Bitcoin And its market, potentially contributing to notable increases, because, with the reduction, the machine to print money will arrive.

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Discharge of responsibility: The views and opinions expressed in this article belong to its author and do not necessarily reflect those of cryptootics. The author’s opinion is informatively and under no circumstances constitutes an investment recommendation or financial advice.