The Bitcoin and crypto community is getting ready to analyze the potential effects of any comments made by the Federal Reserve on digital assets like Bitcoin as the financial markets get ready for the Federal Open Market Committee (FOMC) meeting on Wednesday, June 12th. Since most economists expect the Fed to keep the funds rate at its current range of 5.25% to 5.50%, investors are focusing on the details of the Fed's economic forecasts and forward guidance.
According to crypto expert Tomo, who published his thoughts on X, the next FOMC meeting would be boring for anybody anticipating major decisions. Interest rates are expected to stay about the same, he said (5.25%-5.50%). While the statement and economic forecast are unlikely to undergo any significant revisions, a hawkish tilt is anticipated in the dot chart.
"In 2024, the rate will shift from 3 cuts to 2 cuts," Tomo said, highlighting the expected changes to the rate forecasts for the next years. The unexpected hawkish move will be a single cut. According to him, there would be little surprise and market volatility since the market has already factored in these predicted modifications.
"According to the data collected so far in March, there are nine individuals who support maintaining current interest rates or reducing them twice, and ten individuals who support reducing interest rates three times or more..." a change from three to two has already been taken into consideration.
The economists at ING, which includes James Knightley and Padhraic Garvey, CFA, are all on the same page when it comes to the possible actions taken by the Federal Reserve. They believe the Fed will maintain its cautious approach in response to sustained inflation and robust employment data, which might lead to a postponement of rate decreases.
"The US Fed accepts that monetary policy is restrictive, but lingering inflation and strong jobs numbers mean it's prepared to wait longer before seriously considering interest rate cuts," the ING team said; they went on to describe their forecasts.
They are of the opinion that the number of anticipated rate cuts for 2024 will be reduced from three to maybe one or two, as shown by the dot plot that shows individual FOMC members' rate estimates.
The Wall Street Journal's Nick Timiraos reports that after last Friday's employment data, JPMorgan and Citigroup withdrew their July rate reduction expectations. The vast majority of market analysts and those keeping tabs on the Federal Reserve now expect the central bank to cut interest rates once or twice this year, most likely in September or December.
Effects on Cryptocurrencies and Bitcoin
Bitcoin and the cryptocurrency market as a whole have lately shown a high degree of sensitivity to macroeconomic data. Bitcoin and other digital assets might benefit from a dollar decline if the market is bracing for a dovish shift, especially if there are indications of rate cuts.
In contrast, cryptocurrency markets might see a decline if the central bank reaffirms the existing interest rate or takes a less dovish position than anticipated, which would boost the dollar. Nevertheless, the dot plot and economic predictions that accompany it show the complex viewpoints of FOMC members. These viewpoints may shed light on the medium-term course of US monetary policy, which may influence the attitude of crypto market investors.
Bitcoin and other cryptocurrencies may face downward pressure if the US currency were to gain due to a hawkish stance that indicated fewer or delayed rate cuts. In contrast, the cryptocurrency market might benefit from any dovish signals or signs of a more lenient approach to rate hikes in the near future.
Chair Jerome Powell's comments during the FOMC news conference will be pivotal in establishing the mood and expectations. Any change in tone toward inflation, economic growth, or potential monetary policy changes will be carefully watched by market players in his remarks. Significant price fluctuations in Bitcoin and the crypto markets might result from how these words are interpreted.
Particularly important in the hours leading up to the FOMC meeting in May 2024 will be the US Consumer Price Index (CPI) numbers. In determining whether the present policy posture is still suitable, these facts will provide crucial context for the Fed's judgments.
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