- The Federal Reserve meets today to decide on interest rates that will affect everything from gold to bitcoin.
- A rate hike is unlikely, but inflation concerns could lead the Fed to postpone planned rate cuts.
- Bitcoin prices have fallen ahead of the meeting, and the cryptocurrency market could be highly volatile depending on the Fed's decision.
The Federal Reserve is set to announce its latest interest rate decision today, June 12th, at 6pm GMT. This highly-anticipated event is expected to have a major impact on traditional financial markets such as gold, oil and the US dollar. But the cryptocurrency world is also eagerly awaiting the Fed's ruling as it could affect the price of Bitcoin and other digital assets.
Fed rate hike unlikely in June
While most analysts expect the Fed to maintain its current interest rate target range of 5.25% to 5.5%, all eyes are on a statement from Fed Chairman Jerome Powell, with investors particularly interested in any hints about the future trajectory of interest rates.
Recent economic data has raised concerns that inflation may persist longer than initially expected, potentially delaying the Fed's planned rate cuts later this year. A rate hike in June is highly unlikely (just a 0.6% chance), but the likelihood of one or two rate cuts in 2024 has decreased.
Economists have lowered their initial forecast of three rate cuts this year to two, with the first cut now expected no earlier than September. U.S. inflation data due today will be a key factor in determining the timing of any rate cuts.
The Fed is wary of potential inflation risks, according to Derek Tang, an economist at L.H. Meyer/Monetary Policy Analytics, who stressed that the Fed needs to take a cautious approach to cutting rates because it doesn't want to unintentionally stimulate the economy too quickly.
Bitcoin Price Falls Ahead of Important Fed Meeting
This meeting could be the most important of 2024, according to Bloomberg Economics, who expect Fed Chairman Powell to provide more clarity on the timeline for rate cuts in his statement. Bloomberg economist Anna Wong predicts there will be just two rate cuts this year, instead of the three previously expected.
Despite expectations of interest rates remaining steady in June, Bitcoin prices have fallen slightly ahead of the Fed meeting. BTC has fallen from $69,000 to $66,000 over the past two days and is currently trading around $67,820. The cryptocurrency market, like traditional markets, is likely to react strongly to signals from the Fed regarding the future direction of interest rates.
Back side
- The Fed may prioritize a strong labor market over inflation, which could result in faster interest rate cuts and benefit the cryptocurrency market.
- While the chances of a rate hike are very low, a surprise decision by the Fed would have a major impact on the cryptocurrency market.
Why is this important?
The Fed's interest rate decision and accompanying statements have the power to shape the near future of cryptocurrency prices. Any changes in the expected number of rate cuts in 2024, especially fewer cuts or even the possibility of a rate hike, could cause big volatility for Bitcoin and other digital assets.
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