Analysts at banking giant ING believe that inflation could rise with Donald Trump taking office in the US. However, this could have a positive impact on Bitcoin.
The US Federal Reserve is expected to cut its policy rate by 25 basis points at its Federal Open Market Committee (FOMC) meeting on Wednesday. In this case, interest rates will be pulled to the range of 4.25% - 4.5%, a total easing of 100 basis points since September.
However, the recent increase in the US Consumer Price Index (CPI) and Producer Price Index (PPI) data raises concerns that inflationary pressures may re-emerge in 2025.
The probability of a 25 basis point rate cut on Wednesday is 97%, according to the CME FedWatch tool. But analysts warn that the Fed’s post-meeting statements and economic projections could limit expectations for a rate cut through 2025.
The impact of Trump policies
As US President-elect Donald Trump is expected to take office in January 2025, the economic impacts of his policies continue to be debated. It is suggested that Trump’s proposed policies, such as tariffs, immigration controls, and individual and corporate tax cuts, could increase inflationary pressures. ING Bank analysts say that these policies could cause the Fed to follow a slower and more limited interest rate reduction process throughout 2025:
“Trump’s policies, which include tariffs and tax cuts, could lead the Fed to follow a shallower and slower path of easing in 2025.”
Bitcoin’s rally and institutional interest
While macroeconomic developments are affecting the market, Bitcoin’s recent rally is largely supported by institutional demand and positive market sentiment, according to analysts. QCP Capital analysts say the Fed meeting could take a backseat to Bitcoin, with BTC gaining strength from increasing institutional interest. However, QCP says, “Although highly unlikely, an overly dovish Fed stance and Powell’s statements could push Bitcoin higher.”
Stay tuned