The post Chamath Palihapitiya Reveals the Real Reason Behind FED Rate Cut Pause appeared first on Coinpedia Fintech News
As the U.S. Federal Reserve gears up for its much-anticipated June meeting, billionaire investor Chamath Palihapitiya shared a bold take on why interest rate cuts may not be coming anytime soon, blaming politics, not the economy.
Rate Cuts Look Unlikely… For Now
According to prediction market Polymarket, there’s a 98% chance the Fed rate cuts will hold steady in June, and nearly 87% expect no changes in July either. While inflation is easing and GDP growth remains steady, Chamath argues the Fed’s reluctance to cut rates stems from political caution, not a lack of economic justification.
Chamath’s $600B Scenario
On the All-In Podcast, Chamath proposed a scenario in which the Fed slashes rates by a full percentage point. He explained such a move would have immediate and powerful effects in the long run, as the government could save around $300 billion in interest payments, and cheaper borrowing costs would stimulate short-term lending and business activity. Combined with Trump’s projected $300 billion in added tariff revenues, that’s $600 billion in potential fiscal gains.
Hence, “If you make that cheaper, people borrow more money. That fuels more growth, and that will end up in GDP,” Chamath said, noting that the resulting economic boost could even outweigh a slight rise in inflation.
So Why Not Cut Rates Now?
If such a move could generate strong growth and fiscal savings, Chamath questioned why the Fed wouldn’t act. In his view, the Fed may be holding back to avoid stirring up political issues before the next elections. So even though the numbers suggest a rate cut makes sense, Chamath thinks the Fed is being careful because of how it might look politically.
If inflation drops closer to 2%, Palihapitiya expects the Fed will face pressure to justify keeping rates high. Should rate cuts happen, he says it’ll fuel confidence in U.S. markets, with global capital flowing into American assets.
Echoing a similar sentiment, Crypto analyst Weaver, in his X post, explained that the Federal Reserve tends to follow the direction of the 2-year Treasury yield. If strong buying pressure pushes the 2-year yield lower, it gives the Fed room to cut interest rates. In short, you have to watch the 2-year yield; when it drops, rate cuts are likely to follow.
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FAQs
The FOMC (Federal Open Market Committee) meeting is when the Fed’s main policy group sets U.S. monetary policy, including interest rates.
As of June 17, 2025, the U.S. Federal Reserve’s target range for the federal funds rate is 4.25% to 4.50%.
