The global stock and cryptocurrency markets are on the edge of their seat as they await a crucial decision by the US Federal Reserve. On Wednesday, the Fed will have their meeting which will bring clarity on the future of interest rates and whether there will be any changes in the “higher for longer” rate regime. As of now, the consensus suggests that the central bank is likely to raise interest rate by 25 basis points, which will put the rate to 5%.

The current rally in bitcoin of 67% towards the end of 2023 is powered by the expectations that the Federal Reserve will eventually pivot and start cutting interest rates sometime this year. However, the Fed Chair Jerome Powell has repeatedly mentioned that the labor market should cool off and bring down the inflation to its 2% target before there could be any rate cuts.

Followed closely by the policy makers are indices, unemployment rate and inflation – the same parameters by which the Fed determines the interest rate. Inflation has also seen an uptrend last year and it appears that it is now winding down. On the other hand, the Fed is wary of allowing any premature decrease in interest rate, as they fear it may result in increased inflation.

While the US senators and members of congress have criticised the Fed’s rate hikes, the likes of Senator Elizabeth Warren have proposed that the Fed should seek alternatives to reducing inflation without the need to force people out of their jobs. However, it is still unclear what decision the Fed will come up with and it will be interesting to see how the markets react after the meeting.



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