The Federal Reserve (Fed) will announce its highly anticipated interest rate decision tonight. Markets strongly expect that interest rates will remain unchanged. However, the real determining factor will be the messages delivered by Fed Chair Jerome Powell. Currently, investors are focused on whether the Fed will give signals about when and to what extent it may cut interest rates.
Fed Rate Expectations and Upcoming Data
At present, the Fed is expected to keep interest rates steady in the range of 4.25% to 4.50%. According to CME Group's FedWatch tool, the vast majority of investors are almost certain that rates will remain unchanged. However, Powell's statements may have a more significant impact on the markets.
Recently, inflation in the U.S. has dropped from 3.1% to 2.8%. This decline is seen as a development that increases the likelihood of a rate cut. If Powell indicates that the decline in inflation is continuing and that the Fed may consider rate cuts more favorably, risky assets, especially Bitcoin and altcoins, may experience a rally. On the other hand, if Powell says something like, "Our fight against inflation is not over yet; we will keep interest rates high for a long time," a wave of selling could hit the markets.
Bitcoin ETFs and Market Uncertainty
Market uncertainty is also evident in the behavior of Bitcoin ETF investors. In recent days, inflows into Bitcoin spot ETFs have slowed, indicating that investors are trying to minimize risk while waiting for the Fed’s decision. If the Fed strengthens expectations for a rate cut, a buying wave may occur in the crypto markets and other risky assets. However, if signals point to high interest rates for an extended period, investors may adopt a more cautious stance.
How Could the Fed’s Decision Impact the Markets? 3 Potential Outcomes:
- Rate cut signals: Bitcoin and altcoins could rally.
- Hawkish statements: Selling pressure on risky assets.
- Ongoing uncertainty: Markets may remain cautious.
In conclusion, the Fed’s interest rate decision tonight and Powell’s statements could trigger sharp market movements. Signals favoring rate cuts may boost risk appetite, while a hawkish stance could increase selling pressure across the markets.