The US Federal Reserve cut interest rates by half a percentage point to a range of 4.75–5 percent, capping nearly two years of rate hikes. But what does this mean for the startup and venture capital ecosystem?
The US Federal Reserve and the worldwide startup ecosystem have a rather convoluted relationship.
Interest rate decisions made by Washington have a big impact on the cost and availability of financing, which are important considerations for venture capital firms and entrepreneurs.
Lower interest rates typically result in lower borrowing costs, which may attract more capital to riskier asset classes, such as startups.
Because the currencies of the Gulf Cooperation Council are fixed to the US dollar, their central banks lower interest rates in line with the US.
Philip Bahoshy, the creator of MAGNiTT and venture data analyst, offers a nuanced viewpoint on the possible effects of rate reductions on the local and international startup environment.
Bahoshy stated in an interview with Arab News that the anticipated trend rather than the actual cut might be more important.
“You need to understand why the Fed has made this decision in order to answer what effect the cut will have on venture capital investment,” Bahoshy stated.
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