Rieder Proposes 50 Basis Point Rate Cut for 2025

TLDR

• Rieder recommends a 50 basis point rate cut for September 2025.
• Market probability of a rate cut has surged to 90%.
• Aggressive rate cuts historically boost cryptocurrency market activity.

Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, recently suggested that the Federal Reserve consider a substantial rate cut of 50 basis points in September 2025. This recommendation is significant, given that rate adjustments typically hover around 25 basis points. Rieder cites key economic concerns including weak labor data, rising unemployment, and acute strain on the housing market as primary reasons for this proposal.

Rieder, known for his contrarian macroeconomic views, has a longstanding reputation in the finance industry. With over a decade at BlackRock, he manages global bond strategies and regularly interfaces with central banks and institutional investors. Given these credentials, his suggestions about monetary policy are closely scrutinized by market participants. Rieder is also rumored to be a potential successor to Jerome Powell as Federal Reserve Chair, though no formal nomination has been made.

Rieder’s Justification for the Rate Cut

Rieder points to specific economic indicators that support his call for a rate cut. According to him, ongoing weak job creation coupled with stable inflation makes a 50 basis-point cut feasible. He believes the Federal Reserve has ample room to maneuver interest rates to aid the housing market and manage inflation better.

If job creation continues to weaken and inflation remains stable, a 50 basis point cut is certainly on the table.

Rick Rieder, CIO, BlackRock

Market Reactions and Institutional Moves

The market is beginning to react to Rieder’s statements. The probability of a September rate cut has surged to 90%, driven by movements in Treasury futures and SOFR options. This has led to a premium increase of approximately $2 million as investors hedge against risks.

This development is also likely to impact various assets, with potential for significant inflows into risk assets if the Federal Reserve implements the proposed rate cuts. BlackRock and other large ETF managers could see increased capital as risk assets rally.

Impact on Cryptocurrency Markets

Aggressive rate cuts historically trigger a “risk-on” environment, increasing institutional interest in cryptocurrencies. During such periods, assets like Bitcoin and Ethereum see a rise in price and market activity as real yields drop. BlackRock’s crypto-focused ETFs could also benefit from increased capital inflows.

On-chain data supports these observations, as rate cut expectations often lead to higher Total Value Locked across DeFi networks. This is particularly true for assets like Ethereum, where TVL and DeFi activity could spike considerably.

Speculative Future Impacts

Past aggressive rate cuts during the 2020 pandemic saw Bitcoin rally by over 300% within six months. Similarly, DeFi TVL grew from less than $1 billion to over $10 billion. If history repeats itself, cryptocurrencies and DeFi tokens may experience significant appreciation.

The Federal Reserve and SEC have not commented on the potential rate cut, though FOMC minutes indicate no action at the July meeting. However, the dovish tone noted by Rieder suggests the possibility of rate adjustments by year-end.

Market sentiment indicates optimism among traders, with many advocating for aggressive accumulation of Ethereum and altcoins. Community channels such as Twitter and Discord buzz with positive outlooks for DeFi and Layer 2 protocols should a rate cut be implemented.

For those tracking updates related to cryptocurrency, it is advisable to monitor platforms providing real-time data. For instance, Romain Max regularly tweets on financial topics, offering insights: