The post Fed could slash rates to 2.5% by 2026; crypto markets brace for impact appeared on BitcoinEthereumNews.com.

First cut likely delayed until March 2026. Tariff-induced inflation cited as key reason for delay. Crypto markets may benefit from lower rates. Morgan Stanley has issued a major forecast that could reshape market expectations across asset classes. The investment bank now predicts that the US Federal Reserve will reduce interest rates seven times by the end of 2026. This would bring the federal funds rate down to a target range of 2.5% to 2.75%. The shift, though delayed, is seen as a possible catalyst for high-risk assets like Bitcoin and other digital currencies, especially as crypto markets typically thrive in low-interest environments. The first rate cut, however, isn’t expected until March 2026—much later than earlier projections. Rate cuts delayed, but deeper than before The revised prediction marks a significant change in Morgan Stanley’s outlook. Economists at the bank had initially expected rate reductions to begin in mid-2025. However, recent inflation risks—specifically from new US tariffs—have prompted a rethink. Michael Gapen, Morgan Stanley’s chief economist for the US, attributed the delay to inflationary pressure expected to arise over the next three to six months. The tariffs are seen as adding to consumer prices, which could prevent the Federal Reserve from cutting rates too early. Morgan Stanley now expects the central bank to stay on hold until March 2026. Once rate cuts do begin, they are projected to come rapidly, with the federal funds rate being reduced by a cumulative 275 basis points across 2026 and into 2027. Impact on crypto and high-risk assets Periods of falling interest rates tend to favour risk assets. When borrowing costs go down, liquidity improves and investors typically shift capital out of low-yield instruments into higher-return opportunities. In past cycles, this has benefited emerging markets, technology stocks, and especially cryptocurrencies. Bitcoin, which was born during the…

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Filed under: News - @ June 25, 2025 12:25 pm