Today’s Federal Reserve (Fed) FOMC meeting could decide the fate of crypto and Bitcoin for the coming weeks and months. As NewsBTC has reported in recent weeks, financial markets around the world are hanging on every word from the Federal Reserve to predict future policies.
Currently, there is little doubt that the FED will raise the interest rate by 75 basis points (bps) today, which would be the fourth consecutive hike. However, for the next meetings in December and January, the futures market is divided.
To that extent, the main focus of today’s session will be on the signals that the FED sends with regard to a possible slowdown in the pace of rate hikes. Currently, the market assumes a 50% probability of a rate hike of 75 basis points in December.
Hawkish Or Dovish?
As in previous meetings, Jerome Powell, Chair of the Federal Reserve, will probably not want to signal that a slowdown in the pace of rate hikes signals an earlier end to tightening or a lower peak rate. Dovish signals could be associated by the market with a slowing of the December rate hike by as little as 50 basis points.
In a note to clients, Chris Weston, head of research at Pepperstone, wrote:
In the Fed’s view, putting the U.S. into a recession is still a lesser evil than not tackling entrenched price pressures.
It seems highly unlikely that the Fed will want to promote a positive reaction in risky assets, and the risks to markets in my mind are skewed to a hawkish reaction – equity up, bond yields and the USD lower.
Therefore, Powell will likely push back on the “pivot” narrative at the FOMC by hinting at a higher peak rate. Presumably, Powell will also want to play for time.
Quite crucial could be the next CPI data, which will be released on November 10 and the U.S. unemployment rate for October which will be released on November 4. If the Consumer Price Index (CPI) declines, this could be a sign that Powell’s policy is working and simply needs time. With the U.S. jobs market continuing to look relatively strong, Powell may have that time.
Job opening numbers came in extremely strong.
The beatings will continue. https://t.co/Fr2O1FPbka
— Dylan LeClair 🟠 (@DylanLeClair_) November 1, 2022
Edward Moya, senior analyst at OANDA told CNBC:
The labor market is going to cool, it’s just not happening as quickly as people thought and that should keep the Fed’s path to slowing rate hikes in place – it might not be in December,…
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