The Bitcoin and crypto community is closely observing for any Federal Reserve signals that can affect digital assets as financial markets get ready for the Wednesday, June 12th Federal Open Market Committee (FOMC) meeting. Analysts believe the Federal Reserve will keep the federal funds rate between 5.25% and 5.50%, therefore emphasizing the Fed’s forward direction and economic forecasts instead.
Regarding X, crypto analyst Tomo (@Market_Look) shared his opinions saying that the forthcoming FOMC meeting might not bring notable adjustments. “Most likely, rates remain the same—5.25% to 5.50%. The dot chart is predicted to move in a hawkish direction, hence there will probably not be any significant adjustment to the statement or economic forecast,” he said.
Tomo also noted anticipated changes in rate forecasts for the next years, noting, “In 2024 the rate will go from 3 cuts to 2 cuts. One cut will be the hawkish surprise.” He thinks these changes are already reflected in the market, suggesting little surprises and low volatility.
Bitcoin’s Examination of Fed Rate Projections
“As of March, 9 persons in favor of maintaining interest rates unaltered or cutting them twice, and 10 people in favor of cutting interest rates three or more times… Already accounted for is a change from three to two.
Economists from banking behemoth ING, including James Knightley and Padhraic Garvey, CFA, share a cautious assessment on the Fed’s likely movements. Given persistent inflation and robust job numbers, they forecast the Fed will remain prudent, thereby perhaps postponing rate decreases even more.
The ING team clarified: “The US Fed accepts that monetary policy is restrictive, but lingering inflation and strong jobs numbers mean it will indicate it is prepared to wait longer before seriously considering interest rate cuts.” They want the dot plot to indicate expected rate decreases for 2024 from three to maybe one or two declining.
Following last Friday’s employment data, JPMorgan and Citigroup have pulled their projections for a July rate cut, according to Nick Timiraos of the Wall Street Journal. Now most Fed watchers and economists predict one or two rate cuts in either September or December of this year.
Macroeconomic data has lately showed vulnerability of Bitcoin and the larger crypto market. A dovish change from the Fed, especially indications of rate decreases, might devaluate the currency and increase Bitcoin and other digital assets. On the other hand, a less dovish posture or a reaffirmation of the present rate may boost the dollar, therefore exerting pressure on the crypto markets.
The dot plot and related economic projections reflect the viewpoints of FOMC members, which will give hints regarding the medium-term direction of US monetary policy, so influencing investor attitude in the cryptocurrency markets. While dovish signals would boost the crypto market, a hawkish tilt may strengthen the dollar and lower Bitcoin and other cryptocurrencies.
Especially important will be the comments made by Fed Chair Jerome Powell during the FOMC news conference. Market players will examine his remarks for changes in attitude about inflation, economic development, and future monetary policy. Significant price swings in the Bitcoin and cryptocurrency markets could result from these readings.
Furthermore crucial will be the May 2024 US Consumer Price Index (CPI) data, which came out just hours before the FOMC conference. These numbers will give the Fed’s judgments vital background, therefore impacting their evaluation of the present policy position.
Trading at $67,707 at press time, Bitcoin dropped 3.5% from yesterday’s high of $71,200.
