This latest move comes as the U.S. central bank battles stubbornly high inflation while dealing with a string of high-profile bank failures.

The U.S. Federal Reserve's Federal Open Market Committee (FOMC) continued its year-plus string of rate hikes on Wednesday, lifting the fed funds rate by 25 basis points to a targeted range of 5%-5.25%.

The price of bitcoin (BTC) held steady in the immediate aftermath of the news, trading at about $28,600.

The Fed's move was widely expected, but investors and traders were looking to the accompanying policy statement and Chairman Jerome Powell's post-meeting press conference (beginning at 2:30 p.m. ET) for clues about whether the central bank was mulling a pause after an historic run of rate hikes that's taken the fed funds rate from 0% in early 2022 to today's 5%-5.25%.

The policy statement was notable for leaving out prior language that suggested continuing rate hikes were a certainty. The statement did take note of "tighter credit conditions" as weighing on the economy going forward, and said the FOMC will "take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."

www.federalreserve.gov

While inflation has fallen from nearly a double-digit pace one year ago to the current level of about 5%, it remains well above the Fed's 2% target, suggesting further tightening of monetary policy is necessary.

The Fed, however, is fighting a two-front war, with its rate hikes possibly having helped expose balance sheet issues at a number of U.S. banks. This past weekend saw the latest in a series of lender failures, with the nation's 12th-largest bank by assets, First Republic (FRC), requiring a joint rescue by the Federal Deposit Insurance Corporation (FDIC) and JPMorgan (JPM).

source: coindesk

#fomc #fomcmeeting #Fed #news #newsbrief

Disclaimer

The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.

Pre-FOMC Meeting Assessment for November: Don't Be Complacent!

With the FOMC meeting this week, the market is currently pricing in the almost certainty that the FED will maintain its benchmark interest rates. The Federal Reserve's futures interest rate tracker from CME is showing a probability of nearly 98% that the FED will not change interest rates. For this reason, many people consider this FOMC meeting to be unimportant. However, that's a mistake. Even though interest rates may not change, the messages for the future need to be closely watched, and the USD, along with related assets, will still bear the brunt of any surprises.

To prepare for this, below are some assessments for the meeting from TD Securities analysts. Let's dive in!
Hawkish Scenario: Probability 20%
This scenario would involve the Federal Reserve temporarily pausing the rate hike and strongly indicating the possibility of additional rate increases before the end of the year. Chairman Jerome Powell emphasizes a strong recovery in Q3 growth, while downplaying the significance of any potential shocks to the broader economy in Q4.
In terms of its impact on the USD index, TD suggests that it could lead to a 0.2% increase in the Bloomberg Dollar Index (BDXY).
Baseline Scenario: Probability 70%
This scenario includes the FED making a decision to pause the tightening, as it did in the previous meeting, with the Federal Open Market Committee signaling the possibility of further rate hikes.
The FOMC will reiterate its commitment to being "patient" in crafting its next policy steps, while emphasizing an increasing dependence on economic data. Analysts at TD also expect Chairman Powell to underscore that while macroeconomic data since the September meeting has been undeniably robust, the Fed may exercise patience in gathering additional necessary data.
In this scenario, the USD may benefit, with an estimated 0.1% increase in BDXY.
Dovish Scenario: Probability 10%
In this scenario, the FED will also pause tightening, but it will come with a message that suggests less need for additional rate hikes due to recent financial tightening conditions (and downward revisions to future interest rate projections via the dot plot compared to September). Chairman Jerome Powell might mention that the best course of action is to be patient because all the tightening policies are still in place, credit supply is continuously shrinking, and upcoming shocks will likely dampen growth in the final quarter of the year.
In this scenario, the USD is believed to face the most significant impact, with TD predicting a potential 0.5% decrease in BDXY.
These are the pre-FOMC meeting assessments for this time, so make sure to consider them when planning your trading strategy!#fomc #fomcmeeting #Fed

Today’s interest rate decision by the U.S. Federal Reserve (Fed) and the following press conference by the Federal Open Market Committee (FOMC) could make up for this year’s most important day so far for the Bitcoin price.

In March, the Fed had raised the benchmark interest rate by another 0.25 basis points (bps). At the time, central bankers were leaving their next steps open. Fed Chairman Jerome Powell clarified that further rate hikes “may be appropriate” and that the decision “will be data dependent.”

25 Bps Expected Despite Strong Headwinds

Most recently, the Consumer Price Index (CPI) surprised on the upside with an annualized decline to 5.0% (from 6.0%), but core inflation is proving to be very sticky. Nevertheless, the market expects today’s 0.25 basis point rate hike to be the last in this cycle.

According to the CME’s FedWatch tool, 89% of market participants believe the Fed will make this move today, despite facing strong headwinds from U.S. politics yesterday. Democratic-led members of Congress called on the Fed to pause rate hikes.

Ten senators and representatives, led by Senator Elizabeth Warren, expressed concern about the Fed’s monetary policy strategy in a letter to Fed Chairman Jerome Powell on Monday and urged avoiding “a recession that kills jobs and crushes small businesses.”

Also arguing against continued aggressive policy is the fact that the fastest rate hike cycle in Fed history has caused deep cracks in the U.S. banking system. Following the fall of Silicon Valley Bank, Signature Bank and First Republic Bank, numerous other regional U.S. banks plunged deep into negative territory yesterday.

The Kobeissi Letter @KobeissiLetter

In addition, the recent collapse of First Republic Bank exacerbates the credit crunch: a decline in bank lending due to a sudden tightening of bank deposits. As the AP reported yesterday, assets are worth less than liabilities at half of the 4,800 U.S. banks.

“It’s spooky. Thousands of banks are underwater,” said Professor Amit Seru, a banking expert at Stanford University. “We shouldn’t pretend this is just about Silicon Valley Bank and First Republic. A large part of the U.S. banking system is potentially insolvent.”

That’s another reason the market continues to call Powell’s bluff. According to CME FedWatch, the market believes the Fed will not only pause after today’s meeting, but also cut rates twice this year – unlike the Fed, which in its latest dot plot forecasts a terminal rate of 5.0% by the end of the year.

Bitcoin Analysis: How to Prepare

A 25 basis point rate hike is already priced in by the market and is not expected to hammer the Bitcoin price. When the interest rate decision is announced at 2 p.m. EST (8 p.m. CET), no major volatility should be expected, which will be coming with the press conference. The only exception is a big surprise: an early pause. However, this scenario seems extremely unlikely.

Due to this, all eyes will be on the FOMC press conference at 2:30 pm EST (8:30 pm CET). Probably the most important statement from Powell will be whether the Fed will pause interest rates in June. If so, the Bitcoin market is expected to immediately react bullish. If Powell denies this statement or states that it depends on the data, it would be bearish.

Another focus will be on the question of interest rate cuts later this year. Especially if Powell emphasizes that the Fed will keep interest rates high until 2024, it would be rather bearish for Bitcoin. The question will be whether Powell or the market is wrong, and who will fold first.

Other important statements are expected on the US banking crisis and expectations of a soft landing (recession). Both of these topics have the potential to move the Bitcoin price.

Meanwhile, traders should be careful with the initial move, as it often initially goes in the wrong direction. As analyst Ted (@tedtalksmacro) explained, hedges are typically unwound shortly after the announcement. Usually there is a short impulse up/down when these positions are unwound, and then “real” move occurs when the positions are bought back, which is why the price then falls/rises again.

Once the short interest is removed, the spot market takes control of the actual move. “This is where you want to follow what spot CVDs are doing, and if it’s different from how perps are moving. […] following the press conference we should be able to gauge things more clearly as hedges will be unwound,” advises Ted.

At press time, the Bitcoin price stood at $28,623.

BTC price, 4-hour chart | Source: BTCUSD on TradingView.com

source: newsbtc

#Fed #fomc #fomcmeeting #cpi #crypto2023

Disclaimer

The views and opinions expres# any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.