While Wall Street may be convinced the Federal Reserve (Fed) is about to slash interest rates, many experts argue the hard economic data says otherwise.
Meanwhile, Bitcoin (BTC) is attempting a recovery, reclaiming above the $111,000 threshold after showing weakness earlier in the week.
Why Experts Say Cutting Rates Now Could Backfire
According to the CME FedWatch Tool, markets are pricing in a 99.6% probability that the Fed will cut rates at its September meeting.
Interest Rate Cut Probabilities. Source: CME FedWatch Tool
With barely two weeks to the next FOMC meeting, traders treat easing as a near certainty. They bet a softer policy stance will ignite another round of liquidity-driven asset rallies.
However, analysts warn that this consensus rests more on sentiment surveys than on actual economic fundamentals.
Hard Data vs. Soft Narratives
Justin D’Ercole, founder and CIO at ISO-MTS Capital Management, told TradFi media that the hard data signals the Fed should not cut rates.
He argued that policymakers risk being swayed by a false narrative arising from soft economic surveys.
D’Ercole noted that these surveys only reflect consumer frustration with high prices but fail to capture the broader strength of the economy.
“The economy is growing at potential, stock valuations are extreme, inflation is running at 3%, and unemployment remains historically low,” The Financial Times reported, citing D’Ercole.
He added that available aggregate labor income is rising at a 4–5% pace, while credit card delinquencies are down year over year. Even commercial real estate, often painted as a looming crisis, shows improving asset quality and lower loan delinquencies.
Markets Want Cuts, But Data Says Otherwise Amid 2024 Echoes
Elsewhere, Kurt S. Altrichter, founder of Ivory Hill, echoed the sentiment. In a recent post on X (Twitter), he referred to the PCE (Personal Consumption Expenditure) inflation data.
“Core PCE is back at 2.9%. Inflation isn’t dead, it’s re-accelerating. GDP just printed 3.3%. That’s not a backdrop for rate cuts. If the Fed forces the cut through, it’s likely the only cut before Powell’s term ends on May 15, 2026. Remember: the market wants a rate-cutting cycle. The data says no,” Altrichter articulated.
US PCE Data Since 2023. Source: Altrichter on X
Altrichter argued that the risk is that the Fed will cave to market pressure at the expense of its long-term credibility in its inflation fight.
Other observers warn of financial market instability if the Fed repeats the 2024 playbook. Independent analyst Ted compared the current setup to September 2024.
A surprise interest rate cut last year initially drove crypto markets higher before triggering a sharp reversal.
“September 2024 Fed cut rates, and #Altcoin MCap pumped 109% in just 3 months. After that, $BTC dumped 30%, while alts crashed 60%-80%. In September 2025, the Fed will cut rates again and commit to more cuts. It seems like history will repeat itself. First, a pump for 1–2 months and then a major crash,” wrote Ted.
The broader debate boils down to credibility versus relief. Cutting rates may temporarily ease pressure on indebted households and businesses. However, critics argue it risks fueling inflationary pressures, asset bubbles, and long-term instability.
“Is saving more marginal jobs in the US economy now more important than maintaining inflation-fighting credibility and financial stability for all consumers?” D’Ercole posed.
With markets already celebrating a cut yet to happen, the Fed faces one of its toughest policy tests in decades, deciding whether to follow the data or the crowd.
* The content presented above, whether from a third party or not, is considered as general advice only. This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.
