11 June 2024
As the financial markets brace for the upcoming Federal Open Market Committee (FOMC) meeting on Wednesday, June 12th, the Bitcoin and crypto community is poised to assess the implications of any Federal Reserve announcements on digital assets such as Bitcoin. With the consensus forecast suggesting that the Federal Reserve will hold the federal funds rate steady at 5.25%-5.50%, the primary interest of investors has turned to the nuances of the Fed’s forward guidance and economic projections.
Crypto analyst Tomo (@Market_Look) shared his insights on X, framing the upcoming FOMC meeting as a non-event for those expecting drastic moves. He stated, “Interest rates are likely to remain unchanged (5.25%-5.50%). There will likely not be any major changes to the statement or economic outlook, and the dot chart is expected to shift in a hawkish direction.”
Tomo also highlighted the anticipated adjustments in the rate projections for the coming years, noting, “In 2024, the rate will shift from 3 cuts to 2 cuts. The hawkish surprise will be 1 cut.” He explained that the market has already priced in these expected adjustments, suggesting minimal surprise and limited market volatility in response.
“As of March, the distribution of dots for 2024 is 9 people in favor of keeping interest rates unchanged or cutting them twice, and 10 people in favor of cutting interest rates three or more times… a shift from three to two is already factored in.”
Banking giant ING’s team of economists, including James Knightley and Padhraic Garvey, CFA, share a similar conservative outlook on the Federal Reserve’s potential moves. They anticipate that the Fed will underscore its cautious stance due to persistent inflation and strong employment figures, potentially delaying rate cuts further into the future.
The ING team elaborated on their expectations, “The US Fed accepts that monetary policy is restrictive, but lingering inflation and strong jobs numbers mean it will indicate it’s prepared to wait longer before seriously considering interest rate cuts.”
They anticipate that the dot plot, which will reveal individual FOMC members’ rate predictions, will show a reduction in the number of projected rate cuts for 2024 from three to possibly one or two.
According to Nick Timiraos of the Wall Street Journal, JPMorgan and Citigroup have withdrawn their predictions for a rate cut in July following the recent jobs report last Friday. Currently, the majority of sell-side economists and other experts monitoring the Federal Reserve anticipate one or two rate reductions in either September or December of this year.
JPM and Citi scrapped their calls for a July rate cut after last Friday’s jobs report.
Most sell-side economists and other professional Fed watchers now anticipate one or two rate cuts this year in either September or December pic.twitter.com/x9tUD06Pmi
— Nick Timiraos (@NickTimiraos) June 10, 2024
Impact On Bitcoin And Crypto
Bitcoin and the broader crypto market have been quite sensitive to macro economic data recently. The anticipation of a dovish turn—particularly any hints of rate cuts—could weaken the dollar and bolster Bitcoin and other digital assets as alternative investments.
Conversely, a reaffirmation of the current rate or a less dovish stance than expected could strengthen the dollar and apply downward pressure on crypto markets. However, the nuanced perspectives of FOMC members, as reflected in the dot plot and the accompanying economic projections, could provide clues about the medium-term trajectory of US monetary policy, which in turn could affect investor sentiment in the crypto markets.
A hawkish tilt, suggesting fewer or delayed rate cuts, might strengthen the US dollar and put downward pressure on Bitcoin and other cryptocurrencies. Conversely, any dovish signals or indications of a softer stance on rate increases in the near future could buoy the crypto market.
During the FOMC press conference, Chair Jerome Powell’s remarks will be crucial for setting the tone and expectations. Market participants will closely analyze his comments for any shifts in tone regarding inflation, economic growth, and future monetary policy adjustments. The interpretation of these remarks could lead to significant price movements in the Bitcoin and crypto markets.
Moreover, the US Consumer Price Index (CPI) data for May 2024 just hours before the FOMC meeting will be critical. These data points will provide essential context for the Fed’s decisions, influencing their assessment of whether the current policy stance remains appropriate.
At press time, BTC traded at $67,707, down -3.5% since yesterday’s high at $71,200.