The anticipation surrounding the Fed’s stance on interest rates has heightened in the wake of recent economic indicators, including unexpected spikes in the US Consumer Price Index (CPI) and Producer Price Index (PPI), stirring volatility across markets, including digital assets.
The consensus, with a 99% probability according to the CME FedWatch tool, suggests interest rates will hold steady. Nonetheless, the spotlight turns to the Fed’s dot plot, a graphical representation of the individual members’ expectations for future interest rates, which could provide crucial insights into the monetary policy outlook for the coming months and years.
Another reason why FOMC not ready to cut: members not yet of broad agreement of that need. Here’s visualizing the dispersion of FOMC views with the help of our new weekly NLP Fed spectrometer. (Interactive version at BECO models —> Fedspeak —> spectrometer) — Anna Wong (@AnnaEconomist)
How Will Bitcoin And Crypto React?
Macro analyst Ted, expressing his perspective on X, underscores the nuanced relationship between macroeconomic trends and the crypto market at the moment. Ted elucidated that spot Bitcoin ETF flows have taken the backseat while macro factors came to the foreground.
He further speculates that “Despite the eventual remarks from [Fed Chair] Powell, the market has already adopted a hawkish stance in anticipation of a ‘higher for longer’ interest rate scenario.”
Michaël van de Poppe, a noted figure in the crypto analysis domain, his insights on the recent downward price movement of Bitcoin via X, citing a mix of factors including the anticipation of the FOMC meeting and significant capital outflows from Grayscale‘s Bitcoin Trust. Van de Poppe advises, “It’s typically in these pre-FOMC periods, perceived as risk-off intervals, that the savvy investor finds opportunities to ‘buy the dip’.”
Goldman Sachs Predicts (Only) 3 Rate Cuts This Year
Goldman Sachs Research recently provided a detailed analysis in their March FOMC Preview. The report highlights the nuanced balance the Fed seeks to achieve between controlling inflation and supporting economic growth. “Our revised forecast now anticipates three rate cuts in 2024, a slight adjustment from our previous prediction, primarily due to a modest uptick in the inflation trajectory,” Goldman Sachs analysts elucidated. They further speculate, “While the immediate focus is on maintaining current rate levels, the trajectory for rate cuts will hinge on inflation dynamics and economic performance indicators.” Goldman Sachs further predicts that the Fed will still target a first cut in June. “This combined with a default pace of one cut per quarter implies that the most natural outcome for the median dot is to remain unchanged at 3 cuts or 4.625% for 2024,” the banking giant remarked.
Goldman: Inflation has been firmer in recent months, but we think it is still on track to fall enough by the June FOMC meeting for a first cut. — Mike Zaccardi, CFA, CMT 🍖 (@MikeZaccardi)As the crypto market and broader financial ecosystems await the outcomes of the FOMC meeting, the prevailing sentiment is one of cautious anticipation. Market participants are closely monitoring the Fed’s commentary for indications of future monetary policy directions via the dot plot. The question for the Bitcoin and crypto market is whether there will be an unpleasant surprise or whether market participants were right with their “higher for longer” policy assumption. At press time, BTC found support at the $62,400 price level, trading at $63,118.
