The U.S. Federal Reserve is to announce another crucial rate hike decision during the FOMC meeting on February 1 that will drive the market direction and economy at least in the first quarter.
Having raised interest rates by 425 bps last year, with four consecutive 75 bps rate hikes and a 50 bps rate hike in December, the market expects a further slowdown in rate hike to 25 bps on Wednesday.
Experts’ Perception of Fed Rate Hike
Former Fed Vice Chairman Roger Ferguson expects a 25 bps rate hike at this month’s FOMC meeting. He believes Fed Chair Jerome Powell will consider cooling inflation, but still far from the 2% target, which sets up for two moves this year. However, the Fed will not pivot now due to the present conditions.
Fed officials projected in December that they would pause when rates move above 5%, but Wall Street traders anticipate a halt slightly below that level.
Christopher J. Waller, a member of the Federal Reserve Board of Governors, asserts the Fed needs six months of data, not three months of positive data to consider a pivot. Thus, the Fed will effectively pause the rate hike before their May 2-3 meeting.
Brett Ryan, a senior US economist at Deutsche Bank, believes the Fed is likely to go with a 25 bps rate hike. However, it’s not about the slowdown, but the pivot when the Fed is confident about the economy.
Mohamed A. El-Erian, Egyptian-American economist and President of Queens’ College, Cambridge, said he would be “shocked” if the Fed does anything other than a 25 basis point rate hike this week. However, a 50 bps rate hike should be considered due to risk management on the policy side and inflation may get sticky.
Also Read: FOMC Meet: Bitcoin (BTC), Ethereum (ETH) In Correction Mode?
Impact on the Crypto Market
The crypto market witnessed a marvelous recovery in January on expectations of a Fed pivot due to cooling inflation and positive jobs data. Bitcoin price has recorded a 40% rally in the month, making a high of $23.8k.
If the Fed goes with a 25 bps rate hike and Powell hints at a dovish approach and economic recovery, the Bitcoin price is likely to cross $25,000. However, a 50 bps rate hike could cause crypto prices to dwindle.
Also Read: Global Events That Will Impact Crypto This Week
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