The American economy is decelerating, primarily caused by worries over the commercial real estate sector, regional banks and the debt ceiling. Interest rates have been raised from almost zero to 5% by the Federal Reserve this year, but there are officials who are thinking about stopping the increases. Some of the major reasons for this are declining real-estate industry, issues with regional banks and increasing debt ceiling.
Recently, the US central bank increased its interest rate by 25 basis points on Wednesday, bringing it to a range of 5.00%-5.25%, and hinted at the possibility of exercising caution moving forward.
Reason for Halting Rate Hikes
The real estate industry in the United States is currently facing a major threat. The commercial sector, in particular, is going through one of its most challenging periods in history. Recent data shows that the ratio of vacant office spaces has sharply increased in the past few months.
As a result, many CRE Reits, including SL Green, Boston Properties, and Simon Property Group, have seen a decline in their stock prices. With debt maturities looming, it is highly likely that several more commercial real estate firms will soon be forced to close their doors.
The tightening of liquidity in the banking industry and the shift of investments to money market funds have resulted in an increase in the number of bankruptcies in the United States. Some notable companies, such as Silicon Valley Bank, Vice Media, and Bed Bath and Beyond, have recently filed for bankruptcy.
At present, the dispute regarding the debt ceiling also continues with both the Democrats and Republicans showing no willingness to reach a middle ground. The Republicans have explicitly stated that they will solely contemplate increasing the debt limit if the Biden administration commits to substantial cutbacks in expenditure. Future discussion between the two factions are expected to resume in the near future.
Impact on Crypto
In the past, cryptocurrencies like BTC and ETH have demonstrated robust growth during times when the Federal Reserve adopts a more relaxed stance. This trend was especially apparent during the Covid-19 pandemic, as most tokens and other assets experienced a notable surge in value.
If the Federal Reserve chooses to pause its rate increases, it could lead to positive results for both stocks and cryptocurrencies, particularly AltSignals (ASI). In the event that the Fed opts for a more cautious approach to rate hikes, there could be a surge in interest for the ASI token.
