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Crypto Daily 2025-07-30 12:35:21

Federal Reserve Should Impose Tariff Inflation Exclusion, Cut Rates in July – Mulhem

The Federal Reserve has found itself under growing pressure from US President Donald Trump amid its reluctance to lower the federal funds rate due to concerns over the inflationary effects of tariffs. Last week, Trump visited the Fed and questioned Chairman Jerome Powell about over-budget renovations, while also reiterating calls for the FOMC to cut rates. A rate cut would directly benefit Bitcoin and other cryptocurrencies, in addition to other risk-on assets, such as equities, while also stimulating US economic activity. However, the market believes the Fed holding rates steady at the FOMC meeting on 30 July is near-certain, with there being just a 3.1% chance of a rate cut as per CME FedWatch and Polymarket giving similarly low odds for a July rate cut . Despite the market’s expectations, Suliman Mulhem, a financial analyst, believes a surprise 25bps cut this week is not completely off the table. “A surprise 25bps cut could be on the cards on 30 July if the Fed decides to accept tariff-induced price hikes as transitory, one-off increases,” Mulhem said. “As the US labour market is not especially tight at the moment and not a material source of inflationary pressure, tariffs are extremely unlikely to induce a wage-price spiral, so their effects are likely to be limited to a one-time price increase rather than recurring price creep.” Mulhem added that the low risk of a wage-price spiral and the fact that companies have low pricing power means the Fed should lower the federal funds rate this week. “The absence of a wage-price spiral, coupled with firms currently having relatively low pricing power and therefore opting to work the majority of the tariffs into their margin rather than hiking prices for consumers, means it would be prudent for the FOMC to make monetary policy decisions with an exclusion on tariff-related inflation and therefore begin cutting the federal funds rate in July.” He also warned that although headline jobs data looks encouraging, some cracks are already beginning to show beneath the surface. “As for the other side of the Fed’s dual mandate, although the unemployment rate has remained close to four percent and the labour market looks robust, non-healthcare private sector job creation has slowed to virtually zero and further cracks could soon begin to show, potentially prompting a jumbo 50bps cut at the September FOMC meeting if the Fed opts to keep rates unchanged on Wednesday.” Bitcoin has been trading in the $116,000-$120,000 range in recent weeks, as the market awaits a new catalyst for a directional breakout. A surprise cut on 30 July could provide Bitcoin with fresh momentum to decisively break above $120,000 and enter a new phase of price discovery. Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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