The Fed’s rate cuts may be politically motivated, increasing inflation – Arthur Hayes

Arthur Hayes, co-founder of BitMEX, believes that the US Federal Reserve's recent rate cuts may be politically motivated and have an impact on the market and inflation.

Speaking to Cointelegraph at Token2049 in Singapore on September 18, Hayes shared his thoughts on the Fed's latest actions, speculating that it could be part of an effort to shore up support for the Democratic Party:

“I have a macro view called Jerome Powell [Federal Reserve chair] and Janet Yellen [Treasury secretary] They want to rally the financial markets so Kamala Harris wins the election.

On September 18, the Fed cut US interest rates by 50 basis points in a move widely expected by investors and analysts.

Hayes says this could have significant implications for both traditional and crypto markets, with long-term consequences for inflation and economic stability.

He noted that the US economy is showing strong gross domestic product growth and unemployment is at historically low levels, pointing to a disconnect between current economic indicators.

He argued that making borrowing cheaper for the government countered the risk of reckless government spending.

“When they go to the ballot box in November, I believe they are trying to push the markets further to make people feel richer and after that time inflation is going to get worse.”

Hayes and Cointelegraph Managing Editor Gareth Jenkinson at Token2049. Source: Cointelegraph

On the reaction to the crypto market that caused a 4% profit, “I think it's the calm before the storm,” and predicted a delayed reaction that could follow the closure of traditional financial markets on Friday.

“What seems to happen is that you get the first reaction and the real reaction is at the close of the TradFi markets on Friday, and then at the end of the week crypto will follow up or down.”

Crypto markets have gained $100 billion since the Fed's announcement, with Bitcoin (BTC) returning to a three-week high of $62,500 in early trading on September 19.

In a September 19 X post, Hayes all eyes are now on the Bank of Japan, which will make a rate decision on Friday, September 20. A weaker Japanese yen will lead to a stronger BTC.

However, the strengthening of the yen and unwinding of the yen carry trade could put pressure on Bitcoin and other asset prices in the near term, Cointelegraph said.

Related: Arthur Hayes predicts short-term market crash on devaluation: Token2049

Meanwhile, in a keynote speech at a Singapore crypto event, Hayes slammed the Fed for a “big mistake” as the US dollar continues to grow and increase government spending.

In early September, Hayes said that rate cuts would not help crypto because the flow of money went from US Treasury bills into high-yielding inverse repurchases.

He also recently predicted a major Bitcoin crash below $50,000, which may never come true. A few days later, Hayes predicted a Bitcoin rally after closing and profiting from a short position.

Cointelegraph reached out to the Federal Reserve for comment and did not immediately receive a response.

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