Crypto Skeptic Senator Warren Calls for Massive Fed Rate Cut
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Senator Elizabeth Warren, a vocal critic of the cryptocurrency industry, has recently turned her focus toward pressing economic issues, calling on the Federal Reserve to cut interest rates aggressively.
In a letter to Fed Chair Jerome Powell, Warren and Senators John Hickenlooper and Sheldon Whitehouse urged the central bank to implement a 75-basis-point rate cut at the upcoming Federal Open Market Committee (FOMC) meeting.
This call comes as traders expect a more modest reduction, likely between 0.25% and 0.5%, amid concerns about the U.S. labor market and the Fed’s ability to control inflation.
Despite the typical bullish impact of rate cuts on risk assets like cryptocurrency and stocks, Warren’s call for a significant rate drop is driven by fears of a weakening labor market and a slowing economy.
This advocacy brings Warren, who has been critical of the crypto sector, to an unexpected convergence with most market participants, including crypto traders, as both push for a sharp rate reduction to stabilize the economy.
Senator Warren’s Call for Immediate Action: Bullish For The Market?
The letter, which Senators Hickenlooper and Whitehouse co-signed, specifically calls for the Fed to cut interest rates by 75 basis points—far larger than the 25-50 basis points currently anticipated by traders.
The Senators argue that the Fed has been too slow in addressing the economic slowdown, with the unemployment rate rising to 4.2% from its historic low of 3.5% in July 2023.
Additionally, they pointed to revised job growth data, which revealed that 818,000 fewer jobs were created over the past year than initially estimated.
Warren and her colleagues fear that the Fed’s continued reliance on high interest rates—currently at a two-decade high of 5.3%—is doing more harm than good.
The letter emphasized that while inflation has significantly cooled, dropping to 2.5% from its mid-2022 peak of 7%, the current labor market conditions necessitate rapid action.
The Senators argue that the Fed can preemptively stave off a potential economic crisis by cutting rates. Warren cited Powell’s earlier remarks, in which he stated that the Fed does not “seek or welcome further cooling in labor market conditions,” as further justification for its aggressive stance.
Moreover, lawmakers criticized Powell for “dawdling” to reduce rates sooner, suggesting that the current level of 5.3% is far above what is necessary.
They pointed to recommendations from the Economic Policy Institute, which suggests that a 3-3.5% federal funds rate would be more appropriate in the current non-inflationary environment.
Economic Impact and Market Reaction
While many market participants are bullish over this, some analysts remain cautious, noting that a larger-than-expected cut could spook the markets, leading to heightened volatility in stocks and cryptocurrencies.
Bitcoin’s price, often influenced by macroeconomic events, reacted positively to the news of potential rate cuts.
On Friday, the cryptocurrency saw gains as traders responded to reports from the Wall Street Journal and Financial Times suggesting the Fed’s Wednesday decision could be a close call.
Currently, Bitcoin is trading at around $60,000, with experts predicting that any significant rate cut could further boost its value.
This is not Warren’s first time at the center of economic debates involving cryptocurrency.
As a well-known crypto skeptic, she has repeatedly criticized the industry for its lack of regulation and potential threats to national security.
In 2021, she famously referred to the industry’s participants as “shadowy super-coders,” and more recently, she raised concerns about foreign adversaries operating crypto mining operations in the U.S.
While Warren’s stance on crypto has made her a controversial figure in the industry, her push for aggressive rate cuts has garnered some unlikely support from market participants who see lower rates as beneficial for risk assets like Bitcoin and other cryptocurrencies.
