- Due to the recent volatile trading in the crypto market, all eyes are now turned to the possible outcomes of the Federal Open Market Committee (FOMC) meeting.
- The latest U.S. Consumer Price Index (CPI) data, showing a decrease in inflation to 3.1% in November, aligned with market expectations.
- Despite market expectations, Federal Reserve Chair Jerome Powell is expected to adopt a potentially more hawkish tone during the FOMC meeting press conference.
All eyes in the crypto market are on the Federal Open Market Committee (FOMC): Expectations of experts and possible impacts on the markets!
Hours Away from the Fed’s Interest Rate Decision
Due to the recent volatile trading in the crypto market, all eyes are now turned to the possible outcomes of the Federal Open Market Committee (FOMC) meeting. Meanwhile, market expectations lean toward maintaining current interest rates, but the real curiosity lies in the Fed officials’ projections for the coming year.
In particular, analysts anticipate a cautious approach given a robust labor market and ongoing inflation, with the focus shifting to potential interest rate cuts in 2024. Considering a strong labor market and cooling inflation data, the Federal Reserve is expected to keep interest rates unchanged. The latest U.S. Consumer Price Index (CPI) data, showing a decrease in inflation to 3.1% in November, aligned with market expectations.
Meanwhile, Gargi Chaudhuri from BlackRock emphasizes an anticipatory “pause” expectation from the Fed, highlighting the necessity of observing economic reactions to the current restrictive interest rates. In a situation where the Dot Plot might indicate fewer future interest rate hikes, attention turns to potential interest rate cuts in 2024.
Crucially, financial markets anticipate a cut in the spring ahead, with the probability increasing to over 50% in May. However, Morgan Stanley strategists take a more conservative approach, expecting the first cut to likely occur in June 2024.
Despite market expectations, Federal Reserve Chair Jerome Powell is expected to adopt a potentially more hawkish tone during the FOMC meeting press conference. Jason Pride from Glenmede suggests that Powell may emphasize that it’s too early to consider interest rate cuts and could highlight the possibility of further increases.
On the other hand, Diane Swonk from KPMG emphasizes that Powell needs to navigate a careful expression while balancing between inflation control and economic growth. As markets await signals from the FOMC on the future trajectory of interest rates in the coming months, the situation remains uncertain.
Will the Crypto Market Gain Momentum After the FOMC Decision?
As speculation continues about the FOMC meeting, indications suggest a tendency to keep interest rates stable at 5.25-5.50%. In particular, the Fed’s last meetings in November and September emphasized evaluating the economy before any adjustments.
Meanwhile, the decision to pause interest rate hikes during the July meeting aimed to balance inflation concerns against potential impacts on economic growth. However, this stability in expected interest rates reflects investor caution, mirroring a broader trend seen in cryptocurrencies like Bitcoin.
As of writing, the global crypto market value declined by 2.02% from yesterday to $1.54 trillion, with a trading volume dropping by 14.7% to $67.56 billion. Despite the recent decline, the fear and greed index reading stands at 73, indicating a “greed” sentiment in the digital asset space.
Meanwhile, the overall market decline stems from recent losses in Bitcoin and other major altcoins in the crypto space. As of writing, the Bitcoin price decreased by 1.62% to $41,150, and the declining trading volume (25.85%) reflects investors’ cautious stance.
Simultaneously, the Ethereum price experienced a 2.29% decrease to $2,177, while the Solana price dropped by 8% to $65.77 as of writing. High-interest rates typically lead to a withdrawal from risk-based assets. However, CME FedWatch predicts a 98.4% probability of the Fed maintaining the current interest rate, highlighting a prevailing sense of stability.
