The Federal Open Market Committee (FOMC) meeting is held eight times a year, and just like with any financial market, the outcome of each meeting has implications for the likes of Bitcoin. The announcement that follows the FOMC meeting reveals whether interest rates have been changed or if they’re staying the same. Now, another FOMC meeting has rolled around, and the market is already speculating on what could happen next.
The Next FOMC And The Expectations
The next FOMC meeting is scheduled for June 16 and 17, after which the Fed Chairman, Jerome Powell, is expected to give a speech outlining the outcome of the meeting. The last FOMC meeting held on April 28-29 saw the Fed holding interest rates at the same level, and the expectations seem to be following the same trajectory once again.
The CME’s FedWatch tool tracks sentiment across the market and plots the graph showing the odds of a change in interest rates or the Fed keeping interest rates the same. According to the tool, the market is still expecting that the Fed will keep interest rates at the same level.
Current interest rates lie at 3.5-3.75% (or 350-370 basis points), and the tool shows that there is a 99.4% chance that the Fed will keep interest rates the same. The remaining 6% swings in favor of the Fed actually hiking interest rates to 3.75-4.00%, or 370-400 basis points. Whereas the odds of the Fed dropping interest rates to 3.25-3.50% lies at 0%.
What Happens To Bitcoin Depending On What The Fed Does
Depending on what the Fed announces after the FOMC meeting, the Bitcoin price tends to react very differently. If the odds are right and the interest rates are kept the same, then the bitcoin price is expected to keep following the same trajectory it’s on, as there would not be any incentive for investors to change their stance at this point.
In the case that the Fed ends up hiking interest rates, then it could be very bearish for the market. This is because higher interest rates lead investors to take less risk, reducing the liquidity flowing into Bitcoin. It also tends to trigger sell-offs, as investors rush to reduce their risk of losing money.
On the other end of this is the Fed actually lowering interest rates. This is the most bullish scenario for Bitcoin as lower interest rates encourage investments in risk assets. In such a case, the Bitcoin price is likely to rise as investors move into the digital asset.
Featured image from Dall.E, chart from TradingView.com
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