The possibility of the US Federal Reserve (FED) lowering interest rates may affect the cryptocurrency market next week. Goldman Sachs analysts abandoned the expectation of a rate hike at the FOMC meeting to be held on March 22.
Goldman’s Fed rate expectation changed: Cut is expected
In the financial world, the Fed’s latest bailout during the pandemic has shocked the entire market. The CME FedWatch Tool, which has predicted the possibility of a rate change by the US Federal Open Market Committee (FOMC), recently reported a decline in predicted rate hikes just nine days before the FOMC meeting. This news is causing investors to rethink their investment strategies and adjust their portfolios accordingly.
According to the CME FedWatch Tool, the FOMC’s forecast for a 50 basis point (bps) rate hike fell to 18.1% from 40% the day before. Meanwhile, the probability of a 25 basis point increase increased to 81.9%. This sharp decline in the estimated rate increase can be attributed to the recent bailouts that have injected significant liquidity into the market.
Recent stimulus packages introduced to help alleviate the economic impact of the COVID-19 pandemic have increased the money supply and lowered borrowing costs. This has led to reduced demand for bonds used to finance US debt. As a result, the yield on US Treasury bonds rose and the probability of a rate hike decreased.
Tuesday, March 14, US employment data will be released
Investors will be eagerly awaiting the release of the US February Consumer Price Index (CPI) data on Tuesday, March 14, which will provide more insight into the health of the economy. These data will be crucial in determining the FOMC’s final March 22 rate hike. If CPI data show that inflation is rising faster than expected, the FOMC may choose to raise interest rates by more than 25 basis points predicted.
The news that the possibility of a 50 basis point rate hike has decreased has already started to show its effect on the market. Investors are moving their money out of bonds and into riskier assets such as stocks, cryptocurrencies and commodities that are expected to perform well in a low-interest rate environment. This change in investment strategy is causing the stock market to rebound as major indices like the S&P 500 and the Nasdaq Composite hit all-time highs.
As you follow on Kriptokoin.com, Bitcoin regained $24,000 before the US employment data and the Fed rate decision.
How could the Fed rate decision affect the cryptocurrency market next week?
It is difficult to predict with certainty how the recent drop in the possibility of a 50 basis point rate hike by the Fed will affect the cryptocurrency market, including Bitcoin, next week. However, there are some factors that could potentially affect the market:
- First, the higher-than-expected CPI data to be announced on March 14 may further reduce the possibility of the Central Bank’s rate hike. This can be seen as positive news for cryptocurrencies as they have historically performed well in low interest rate environments.
- Second, the recent stimulus packages and injection of liquidity into the market could potentially lead to increased demand for cryptocurrencies as investors seek alternative assets that can generate higher returns. This could potentially lead to an increase in the price of Bitcoin and other cryptocurrencies in the short term.
However, it is important to note that the cryptocurrency market is highly volatile and subject to sudden price movements that can be triggered by various factors such as regulatory changes, news or global economic developments. That’s why it’s always important to be careful and do extensive research before making any investment decision.
Solution
As a result, recent bailouts have had a significant impact on the possibility of a rate hike by the FOMC. The decline in the interest rate hike expectations caused investors to change their investment strategies, causing a rally in the stock market. However, the release of February CPI data on Tuesday, March 14 will be important in determining the FOMC’s final interest rate hike on March 22. Investors will be eagerly awaiting this data to determine their next move in the market.
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