Arthur Hayes Speculates Fed Rate Cut May Be Politically Motivated to Sway Voters Toward Harris

BitMEX co-founder Arthur Hayes has recently claimed that the U.S. Federal Reserve’s latest interest rate cut politically motivated.

Hayes asserted that the Fed’s decision to cut rates by 50 basis points might be aimed at bolstering support for Vice President Kamala Harris as she eyes a potential presidential run.

Speaking at Token2049 in Singapore on September 18, Hayes speculated that key figures in the Fed such as Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen are attempting to manipulate the financial market to influence voters.

“I have a macro view that Jerome Powell and Janet Yellen want to juice financial markets to help Kamala Harris win the election,” Hayes remarked during the Token2049 event.

Disconnect Between Economic Conditions and Policy

Many market analysts have questioned the logic behind decreasing the interest rates at a time when the inflation rate is increasing due to excessive government spending.

Hayes pointed out a concerning gap between the Fed’s rate cut and the prevailing economic indicators in the United States arguing that the decrease in interest rates was counterintuitive.

“The rate cut is a bad idea because inflation is still an issue in the U.S., with the government being the biggest contributor to sticky price pressures,” he explained.

Hayes also emphasized that the move to make borrowing cheaper could only worsen inflationary pressures instead of alleviating them.

“I believe they’re trying to get markets to go even higher, to make people feel even wealthier as they go into the ballot box in November,” he stated, warning that this act could come at the expense of long-term economic stability.

Implications for Traditional and Crypto Markets

The immediate market reaction to the Fed’s move was positive, with crypto markets gaining approximately $100 billion, and Bitcoin’s price spiking to $62,500 – a three week high. However, Hayes warned that the initial surge might just be a flash in the pan.

“I think it’s the calm before the storm,” Hayes said, suggesting that risk assets, including cryptocurrencies, could crash a few days after the first Fed rate cut as traditional markets close out for the week.

Hayes further highlighted the potential for the rate cut to disrupt international markets, especially with the yen. Historically, a narrowing interest rate differential between the U.S. and Japan always strengthens the yen and triggers a wave of risk aversion in global markets.