Federal Reserve Bank of Cleveland President Beth Hammack said she saw no need to change U.S. interest rates for months ahead after the central bank cut borrowing costs at its last three meetings, the Wall Street Journal reported on Sunday.
Hammack opposed recent rate cuts as she is more worried about elevated inflation than the potential labor-market fragility that prompted officials to lower rates by a cumulative 75 basis points over the past few months, the report added.
Hammack told the Journal that the Fed didn’t need to change its benchmark interest rate, currently in a range between 3.5 percent and 3.75 percent, at least until the spring.
By then, Hammack said, it would be able to better assess whether recent goods price inflation was receding as U.S. President Donald Trump’s tariffs are more fully digested through the supply chain, the report said.
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Hammack said that November’s consumer price index of 2.7 percent probably understated 12-month price growth due to data distortions, the report added.
“My base case is that we can stay here for some period of time, until we get clearer evidence that either inflation is coming back down to target or the employment side is weakening more materially,” Hammack told the Journal in a podcast interview recorded on Thursday, citing inflation concerns.
Speaking at an event in Cincinnati earlier this month, Hammack said she wanted to focus on high inflation and that she would prefer monetary policy to be tighter.
Hammack said the current policy rate was right, around a neutral level, but would prefer a slightly more restrictive stance to help put more pressure on inflation.
Hammack will be a voting member of the FOMC next year, which oversees important decisions regarding monetary policy and interest rates.
Reporting by Abu Sultan in Bengaluru; Editing by Andrew Heavens, Ros Russell and Gareth Jones
The Bitcoin’s behavior around US Federal Reserve announcements has become one of the most consistent market patterns of the year. After every FOMC update, the world’s largest cryptocurrency has reacted with a noticeable downside move, underscoring how closely the asset is now tied to shifting interest-rate expectations and broader macro sentiment.
What Future FOMC Meetings Could Mean For Bitcoin
In an X post, analyst CryptoMichNL has mentioned that the Federal Reserve (FED) is preparing to update the printer from 2021 liquidity settings toward a more supportive 2025 stance. However, this doesn’t mean it will have an immediate impact on the markets, as these things take time. As a result of the update, Bitcoin has dropped after every Federal Open Market Committee (FOMC) meeting in 2025, but these moves are primarily aimed at flushing out longs through high liquidations.
According to the expert, the actual move on the markets and the direction should come in the next 1-2 weeks, which would give a better outlook going into 2026. The bullish trend has remained intact, and the thesis is still valid. However, BTC shouldn’t break the lows during the FOMC flush. Instead, it should break the $92,000 resistance zone to retest the $100,000 level.
Bitcoin is still moving in a choppy pattern, driven by illiquid order books and fast moves in both directions. CryptoMichNL has also highlighted that BTC is still in for a new upward breakout in the coming days to weeks. Despite the volatility, BTC has continued to form higher lows, which is a clear sign that an upward structure is building.
CryptoMichNL noted that, as the price doesn’t break down anymore, the heavy correction in the market was highly manipulated and not organic, which is very natural for the market to return to normal.
Why Bitcoin Market Structure Remains Intact Despite Deep Pullback
Bitcoin has not proven to be any different from the cycle. A full-time crypto trader and investor, Daan Crypto Trades, pointed out that the good initial bounce is right off the 0.382 Fibonacci retracement level, which is taken from the entire cycle move. Realistically, that was the lowest the price could go without breaking the broader weekly market structure.
According to Daan, the invalidation is clearly the higher-timeframe outlook, and the November lows would become a very uncomfortable place for the bulls. As the year comes to an end, a lot of the 4-year cycle selling should also be diminishing. Meanwhile, Q1 2026 is shaping up to be extremely important as it will likely reveal where the BTC cycle will move next.
The Bitcoin price is positioning for a potentially explosive move that could take it well beyond its previous all-time highs. Analysts are closely watching a critical resistance level near $116,000, which may serve as the final hurdle before BTC catapults into uncharted territory above $126,000.
Analyst Predicts New Bitcoin Price All-Time High
Crypto analyst Donny Dicey revealed in an X social media post this week that the $116,000 price level is the decisive zone Bitcoin must breach to confirm a breakout toward a new all-time high. His technical analysis suggests that once BTC achieves a clean break above this resistance area, momentum could swiftly carry it above $126,000.
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Notably, Bitcoin set a new ATH on October 6, 2025, after breaking through its previous record above $124,000 and climbing past $126,000. Since achieving this level, the price of BTC has fallen dramatically to $115,000. Dicey’s accompanying chart shows the market steadily recovering after testing support near $108,000, marked as a “market structure break” region, with bullish price action consolidating above $109,000.
The analyst has emphasized that each day Bitcoin maintains a close above $109,000 strengthens the probability of a strong upward swing as the market heads into November. This period coincides with the Federal Open Market Committee’s (FOMC) next meeting, where investors are anticipating dovish signals such as rate cuts or the formal end of Quantitative Tightening (QT).
Dicey also notes that bullish S&P 500 earnings, easing global trade tensions from a potential agreement between US President Donald Trump and China’s President Xi Jinping, and improving ISM manufacturing data point to a macro environment supportive of risk assets. A community member commented that whales may have underestimated how much BTC’s demand tends to persist during these conditions. Dicey responded that the same whales might become “exit liquidity” as Bitcoin accelerates higher, possibly missing out on the strongest phase of this cycle.
Consolidation Above January Highs Signal Unbreakable Strength
In a follow-up analysis, Dicey highlighted Bitcoin’s remarkable stability above its January highs, describing its price structure as “unbreakable” amid global macroeconomic uncertainty. He pointed to several converging factors that reinforce BTC’s resilience, including ongoing fiscal and monetary expansion, a weakening US dollar, and renewed confidence in the global business cycle.
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The analyst also emphasized that geopolitical tensions tied to US-China relations appear to be subsiding. At the same time, ETF inflows and exponential growth in the Artificial Intelligence (AI) sector contribute to acting as tailwinds for digital assets. He disclosed that despite strong underlying fundamentals, skepticism remains widespread in the market.
According to him, many still believe in the traditional four-year cycle narrative, while retail enthusiasm has not fully returned. Furthermore, the Russell 2000 index has yet to breakout, and rotation from traditional assets, such as the S&P 500 and gold, into Bitcoin remains limited. With these developments subduing broader market participation, Dicey suggests it creates the perfect setup for a powerful rally in BTC once sentiment shifts decisively.
BTC trading at $115,411 on the 1D chart | Source: BTCUSDT on Tradingview.com
Featured image from Pixabay, chart from Tradingview.com
The Federal Reserve faces an unprecedented challenge as it prepares to set interest rates next week—making its decision with almost no economic data available.
The government shutdown has halted the release of most U.S. economic statistics, including the monthly jobs report. However, the Fed also recently lost access to one of its main private sources of backup data.
Payroll-processing giant ADP quietly stopped sharing its internal data with the central bank in late August, leaving Fed economists without a real-time measure that had covered about one-fifth of the nation’s private workforce. For years, the feed had served as a real-time check on job-market conditions between the Bureau of Labor Statistics’ monthly reports. Its sudden disappearance, first reported bythe Wall Street Journal, could leave the Fed “flying blind,” former Bureau of Labor Statistics commissioner Erica Groshen said.
Groshen told Fortune that, in her decades working at the BLS and inside the Fed, the loss of ADP data is “very concerning for monetary policy.”
The economist warned that at a moment when policymakers are already navigating a fragile economy—Fed Chair Jerome Powell has said multiple times that there is no current “risk-free path” to avoid recession or stagflation—the data blackout raises the risk of serious missteps.
“The Fed could overtighten or under-tighten,” Groshen said. “Those actions are often taken too little and too late, but with less information, they’d be even more likely to be taken too little too late.”
Rupture after years of collaboration
Since at least 2018, ADP has provided anonymized payroll and earnings data to the Fed for free, allowing staff economists to construct a weekly measure of employment trends. The partnership is well-known to both Fed insiders and casual market watchers. However, according to The American Prospect, ADP suspended access shortly after Fed Governor Christopher Waller cited the data in an Aug. 28 speech about the cooling labor market.
Powell has since asked ADP to restore the arrangement, according to The American Prospect.
Representatives at ADP did not respond to Fortune’srequest for comment. The Fed declined to comment.
Groshen said there are several plausible reasons why ADP might have pulled the plug. One possibility, she said, is that the company found a methodological issue in its data and wanted to fix it before continuing to share information used in monetary policy.
“That would actually be a responsible decision,” she told Fortune, noting that private firms have more flexibility than federal agencies but less institutional obligation to be transparent about errors.
Another explanation, Groshen said, could be internal or reputational pressure. After Waller mentioned the collaboration publicly, ADP may have worried about how it looked to clients or shareholders.
“You could imagine investors saying, ‘Why are we giving this away for free? The Fed has money,’” she said. The company might also have wanted to avoid being seen as influencing central-bank decisions, especially in a politically charged environment.
Whatever the motivation, Groshen said the episode underscores how fragile public-private data relationships remain. Without clear frameworks or long-term agreements, companies can withdraw at any time.
“If policymakers build systems around data that can vanish overnight,” she said, “that’s a real vulnerability for economic governance.”
A data blackout at a critical moment
The timing could hardly be worse.
On Thursday next week, the Federal Open Market Committee meets to decide whether to lower interest rates again, following a long-awaited quarter-point cut in September. With the BLS pausing most releases under its shutdown contingency plan, official figures on employment, joblessness, and wages have been delayed—starting with the September report and possibly extending into October.
In the absence of real-time data, Fed economists are relying on a patchwork of alternatives: state unemployment filings, regional bank surveys, and anecdotal reports from business contacts. Groshen called those “useful but incomplete,” adding that the lack of consistent statistical baselines makes monetary policy far more error-prone.
She advocated for the BLS to receive “multiyear funding” from Congress so that it could stay open even during government shutdowns.
“I hope that one silver lining to all these difficulties will be a realization on the part of all the stakeholders, including Congress and the public, that our statistical system is essential infrastructure that needs some loving care at the moment,” Groshen said.
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The Federal Reserve’s first rate cut of 2025 has landed—25 basis points on September 17—and, in Trader Mayne’s telling, that removes the last macro “X-factor” hanging over the crypto market. In a video analysis posted the same day, the veteran price-action trader argued that with the policy move now in the rear-view mirror, crypto can “just focus on the charts,” sketching a roadmap in which Bitcoin posts one more leg higher into new all-time highs before a pullback ushers in a classic altseason blow-off. “We had FOMC today and the rates got cut finally… It’s 25 basis points,” he said. “Now the market’s going to digest it.”
Where Is Bitcoin Price Going Next?
The policy backdrop he’s reacting to is straightforward: the FOMC lowered the fed funds target range by a quarter point to 4.00%–4.25% on Sept. 17, with Chair Jerome Powell describing the move as a risk-management response to weakening labor dynamics and leaving the door open to additional easing this year. The decision drew an 11–1 vote, with newly appointed Governor Stephen Miran dissenting in favor of a larger, 50 bps cut—an unusually hawkish dissent in a dovish direction—while the Board’s implementation note reset key administered rates effective Sept. 18. Markets read the statement and projections as signaling scope for further cuts into year-end.
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From here, Mayne’s framework is unapologetically technical. He characterizes Bitcoin’s most recent upswing as corrective relative to the prior impulse and expects price to “push above the mid-range” toward a range high around $120,000–$121,000, where he will watch for rejection at a higher-time-frame confluence defined by a weekly swing-failure pattern (SFP) and an H12 breaker.
If momentum stalls there, he plans to short into a washout to clear out built-up leverage—“HYPE made another all-time high today. PUMP has tripled in the last two weeks… there’s some leverage in the system”—and then buy the dip for what he calls the last parabolic leg of the cycle. “Any sort of dip on BTC, I want to be looking for a long,” he said, adding that a shallow retest in the $110,000–$111,000 area or a deeper sweep of recent lows would both be acceptable springboards if the rebound is decisive.
If, instead, price grinds through the $120,000 s with no signs of exhaustion, Mayne says he has “no problem” flipping to breakout longs above the all-time high once strength is confirmed intraday—an approach that mirrors his playbook from prior expansions (“Once this thing broke out aggressively… you’re looking for longs”). He emphasizes sequence over prediction: the short he’s eyeing is counter-trend—“a pullback in an uptrend”—and the prime objective remains to position for the next impulsive advance.
When Will The Crypto Market Top?
Timing-wise, he situates the prospective cycle top in Q4 2025 or Q1 2026, describing a pattern in which Bitcoin’s final vertical leg into the $150,000 to $180,000 region is followed by distribution while altcoins reprice higher—the archetypal altseason.
“This parabolic leg I think would be the last leg of the bull run,” he said, before outlining notional alt targets consistent with a late-cycle melt-up: Ethereum $5,000–$7,000, Solana $300–$500, Dogecoin $0.50–$0.70. The mechanics, as he narrates them: a last BTC push, a corrective wash, a V-shaped reclaim of the 2024 ATH “very quickly,” then Q4 “mania” with breadth shifting to large-cap alts as Bitcoin distributes.
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The technical scaffolding behind that view leans on concepts familiar to discretionary price-action traders. Weekly SFPs (failed breaks of prior extremes) set the trap line at range edges; H12 breakers and order blocks frame high-probability reaction zones; and fair-value gaps guide where liquidity vacuums might fill during a corrective flush.
On structure, he insists the weekly trend remains up, so any short is tactical and any deeper dip must resolve in a swift V-bottom and reclaim of the former highs to keep the cyclical script intact. His invalidation is equally clear: “If we spend any significant time back below [the 2024 all-time high], it’s really bad… I’m probably going to reassess my thoughts.”
Macro, in Mayne’s view, now recedes to the background. The rate cut may have helped pull forward some September strength—“you could argue… the up move we’ve seen on Bitcoin… is in anticipation of this rate cut”—but with the decision made and Powell hinting there “could be another one… there could be two,” his emphasis is squarely on execution: wait for price to trade into the $120,000s and signal weakness for the clean counter-trend short; or, absent weakness, wait for the breakout continuation and ride it. Either way, he’s explicit about the north star for the coming weeks: “Focus on Bitcoin… Any sort of dip on BTC, I want to be looking for a long… Then altseason.”
Officials implied that there would be two more cuts to follow later this year. The committee meets in two months, on October 28 and 29. “In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook,” the committee wrote in a press release.
EY-Parthenon Chief Economist Gregory Daco told Entrepreneur in a statement that, although inflation is picking back up, “economic activity and employment are simultaneously slowing,” causing the balance to tilt toward more rate cuts. He also predicted that there would be two more rate cuts to follow this year.
Here’s how the interest rate cut could impact your wallet.
U.S. Federal Reserve Chair Jerome Powell speaks at a news conference at the Federal Reserve headquarters, following the Federal Open Market Committee (FOMC) meeting in Washington, DC, on September 17, 2025. JIM WATSON/AFP via Getty Images
Why did the Fed cut rates by a quarter percentage point?
Economists and industry experts predicted a 94% chance of a quarter percentage point (0.25%) cut, following data released earlier this month that showed that hiring was slowing, and inflation was 2.9% in August, an increase from July’s 2.7% and higher than the Fed’s preferred 2% target.
The central bank’s rate-setting committee, the Federal Open Market Committee (FOMC), has kept interest rates within the 4.25% to 4.5% range for the past nine months as its members analyzed economic activity. The FOMC decides on rate cuts based on two broad goals: minimizing inflation and maximizing economic activity in the labor market. Wednesday’s rate cut now lowers the range to 4% to 4.25%.
When is the next Fed meeting, and what is expected?
The Fed meets eight times a year in regularly scheduled meetings to set U.S. monetary policy. The FOMC sets the target range for the federal funds rate, the interest rate banks use to lend to each other, which influences broader rates that affect consumers, like credit card interest rates.
Officials indicated two more possible rate cuts this year.
How does the Fed affect mortgage rates?
The Federal Reserve’s decision does not directly affect mortgage rates because mortgage rates are tied to 10-year Treasury bonds. So, a lower federal funds rate does not necessarily mean lower mortgage rates, Melissa Cohn, Regional Vice President of William Raveis Mortgage, told Entrepreneur.
“The Fed cut will not cause mortgage rates to change,” Cohn said in an emailed statement.
Instead, “how the bond market reacts to the Fed cut will determine the direction of mortgage rates,” and what Powell says during the press conference will “be key to market reactions,” she wrote.
When faced with market uncertainty, investors buy Treasury bonds, driving mortgage rates down.
However, the bond market has already recently responded to news of a possible rate cut, with mortgage rates dropping to a three-year low on Tuesday ahead of the Fed meeting. As of Wednesday morning, the average interest rate for a 30-year fixed-rate mortgage was 6.24%, one of its lowest levels since early October of last year.
Credit card interest rates tend to move in alignment with the federal funds rate, per Bankrate. So the 0.25% cut could have an impact on credit cardholders with a reduction of 0.25% to their interest rates.
Other market conditions, like inflation and the demand and supply of credit, affect the basis for most credit card interest rates. That’s why interest rates for credit cards as a whole have been increasing, from 15% in 2021 to more than 21% in 2025, despite rate cuts last year.
Credit card companies are charging higher interest rates than four years ago, per Bankrate.
An appeals court ruled Monday that Lisa Cook can remain a Federal Reserve governor, rebuffing President Donald Trump’s efforts to remove her just ahead of a key vote on interest rates.
The Trump administration is expected to quickly turn to the Supreme Court in a last-ditch bid to unseat Cook. The Fed’s next two-day meeting to consider its next interest rate move begins Tuesday morning. And Cook’s lawsuit seeking to permanently block her firing must still make its way through the courts.
The White House campaign to unseat Cook marks an unprecedented bid to reshape the Fed’s seven-member governing board, which was designed to be largely independent from day-to-day politics. No president has fired a sitting Fed governor in the agency’s 112-year history.
Separately, Senate Republicans on Monday confirmed Stephen Miran, Trump’s nominee to an open spot on the Fed’s board. Barring any last-minute intervention from the Supreme Court, the Fed’s interest rate setting committee will meet Tuesday and Wednesday with all seven governors and the 12 regional bank presidents.
Twelve of those 19 officials will vote on changing the central bank’s short-term rate: All seven governors plus five regional presidents, who vote on a rotating basis.
Chair Jerome Powell signaled in a high-profile speech last month the Fed would likely cut its key rate at this meeting, from about 4.3% to 4.1%. Other borrowing costs, such as mortgage rates and car loans, have already declined in anticipation of the cut and could move lower.
Trump sought to fire Cook Aug. 25, but a federal judge ruled last week that the removal was illegal and reinstated her to the Fed’s board. Trump appointee Bill Pulte has accused Cook of mortgage fraud because she appeared to claim two properties as “primary residences” in July 2021, before she joined the board. Such claims can lead to a lower mortgage rate and smaller down payment than if one of them was declared as a rental property or second home. Cook has denied the charges.
In a 2-1 decision, the appeals court found that Cook’s due process rights were violated because the administration did not give her a formal opportunity to respond to the charges.
The attempt to fire Cook is seen by many legal scholars as a threat to erode the Fed’s longtime political independence. Economists prefer independent central banks because they can do unpopular things like lifting interest rates to combat inflation more easily than elected officials.
Many economists worry that if the Fed falls under the control of the White House, it will keep its key interest rate lower than justified by economic fundamentals to satisfy Trump’s demands for cheaper borrowing. That could accelerate inflation and could also push up longer-term interest rates, such as those on mortgages and car loans. Investors may demand a higher yield to own bonds to offset greater inflation in the future, lifting borrowing costs for the U.S. government and the entire economy.
Separately, Miran chairs the White House’s Council of Economic Advisers and said earlier this month he would take unpaid leave but otherwise keep his job while serving on the Fed’s board. It will be the first time in decades that an executive branch official has served at the Fed.
Miran has been appointed to finish a term that expires in January, but he could remain in the seat if no replacement is chosen.
Cook has denied any wrongdoing and has not been charged with a crime. According to documents obtained by The Associated Press, Cook did specify that her Atlanta condo would be a “vacation home,” according to a loan estimate she obtained in May 2021. And in a form seeking a security clearance, she described it as a “2nd home.” Both documents appear to undercut the administration’s claims of fraud.
Last week, U.S. District Court Judge Jia Cobb ruled that the administration had not satisfied a legal requirement that Fed governors can only be fired “for cause,” which she said was limited to misconduct while in office. Cook did not join the Fed’s board until 2022.
In their emergency appeal, Trump’s lawyers argued that even if the conduct occurred before her time as governor, her alleged action “indisputably calls into question Cook’s trustworthiness and whether she can be a responsible steward of the interest rates and economy.”
Trump has repeatedly attacked Powell and the other members of the Fed’s interest-rate setting committee for not cutting the short-term interest rate they control more quickly. Trump has said he thinks it should be as low as 1.3%, a level that no Fed official and few economists support.
Cook is the first Black woman to serve as a Fed governor. She was a Marshall Scholar and received degrees from Oxford University and Spelman College, and prior to joining the board she taught at Michigan State University and Harvard University’s Kennedy School of Government.
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Dalmas, a seasoned crypto reporter, brings a unique perspective to the industry. His specialization in NFTs, blockchain, DeFi, and blockchain news for NewsBTC, combined with a background in mechanical engineering and over a decade of experience in journalism, has allowed him to craft over 10,000 news and feature articles over the past eight years. His diverse range of topics, including technology, Forex, and finance, reflects his comprehensive understanding of the crypto landscape.
His technical expertise and analytical skills have been recognized and featured by leading news outlets such as Investing.com, CoinTelegraph, Entrepreneur, Forbes, and other authority sites. Notably, he broke key news, including the Ripple and MoneyGram partnership, cementing his position as a thought leader in crypto. The news exploded. Over 100,000 people devoured this meticulously crafted report, from seasoned investors to curious newcomers. His analysis wasn’t just dry facts and figures; it crackled with insight, dissecting the implications of the partnership and its potential impact on the future of finance.
His deep understanding of the financial markets, technological advancements, and blockchain developments has made him a respected voice in the industry.
Dalmas is also the founder of BTC-Pulse, a crypto news site, further demonstrating his commitment to the field. He firmly believes that DeFi and NFTs are here to stay and will continue to drive financial inclusion.
Coming from Nairobi, Kenya, it is easy to see the source of his inspiration: Across Africa, millions lack access to traditional banks. Remote villages, limited documentation, and high minimum balances create insurmountable barriers.
DeFi, not just Maker or Aave, for example, but think of Bitcoin and USDT, cuts out the middleman. Forget banks with their limitations. Even so, DeFi isn’t a magic solution. The continent still struggles with reliable internet access, and educational campaigns highlighting the benefits of this wonderful solution are insufficient. Moreover, even for those interested, understanding DeFi can look like learning a new language.
Dalmas is here to help make the tech easy to understand and digestible, even for beginners. The story of DeFi in Africa is still being written. Challenges abound, but the promise of a more inclusive financial future is a powerful motivator. With innovation and collaboration, Dalmas firmly believes that DeFi could become the key to unlocking Africa’s full economic potential. This possibility and its immense value motivate Dalmas to continue breaking key DeFi innovations and more across the globe. His engineering background further enhances his ability to deliver well-thought-out pieces that blend technical insight with clear, impactful reporting.
Beyond his professional achievements, Dalmas is deeply passionate about technology and politics. Policies drive adoption, and being at the forefront and keeping up with how they evolve is crucial for the sphere to mature.
When Dalmas is not closely monitoring the latest crypto events, he can be found in nature, exploring the picturesque countryside, and traveling with his family and friends. His love for adventure and discovery perfectly complements his investigative and reporting skills. You can connect with Dalmas on X: @Dalmas_Ngetich, or contact him on Telegram @Dalmas_Ngetich.
For the crypto and broader financial market, FOMC day is upon us once again today. And analysts agree that today’s meeting will be one of the most important in recent years. Kurt S. Altrichter, a financial advisor and founder of Ivory Hill, even describes today’s FOMC meeting as the “most important of your life.” In a new post on X, Altrichter explains why.
FOMC Preview
Central to today’s FOMC meeting is the Federal Reserve’s potential indication of a September rate cut. According to Altrichter, the financial markets are almost unanimously anticipating this move, with Fed fund futures indicating a near-certain likelihood of such an outcome. “Market expectation is a strong signal for a September rate cut,” Altrichter points out, marking today’s update as a pivotal moment for financial markets.
The key question for today is: “How strongly does the Fed signal a September rate cut?” the expert explains. Investors are directed to pay close attention to the FOMC’s statement at 2:00 pm ET, especially the third paragraph, which could subtly signal the Fed’s confidence in reaching its inflation targets.
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Altrichter advises, “Look at the 3rd paragraph for this key sentence: The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.” Any modification in this wording would be a clear signal that the Fed is nearing its inflation control goals, potentially paving the way for rate adjustments.
Altrichter outlines several potential outcomes from the meeting, each associated with specific market reactions. In a dovish scenario, the Fed signals a rate cut for September. Then, Altrichter expects a broad market rally, especially in sectors less sensitive to interest rates. “Yields and the dollar should fall modestly with a modest rally in commodities,” Altrichter predicts, suggesting significant movements in standard and sector-specific indexes.
In a hawkish scenario, there will be no change in the forward guidance by the US central bank. If the Fed maintains its current stance without hinting at future cuts, the markets might experience a downturn. “Look out below and expect a sharp decline. SPX should fall by 1-2%,” he warns, noting that tech and growth sectors might relatively outperform due to their appeal during higher yield periods.
How Will Bitcoin And Crypto React?
The potential adjustments in US monetary policy bear direct consequences for the Bitcoin and crypto markets. Crypto, often viewed as alternative investments, reacts sensitively to shifts in monetary policy, particularly regarding interest rates.
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If the dovish scenario materializes, this could make Bitcoin and cryptocurrencies more appealing. A signal of lower future rates could drive increased investment into the crypto market, potentially leading to price increases as investors seek higher returns in alternative assets.
Conversely, should the Fed signal reluctance to cut rates, indicating a stronger economic outlook or concerns about inflation, this could strengthen the US dollar and increase yields on traditional financial instruments. Such an environment might lead to a pullback in the crypto markets, as the comparative advantage of Bitcoin and cryptocurrencies diminishes against strengthening traditional yields.
Max Schwartzman, CEO of Because Bitcoin Inc, commented via X: “FOMC is [today] & its incredibly important as we get into the end of this fed cycle… Here is how the last 11 meetings have gone for Bitcoin…”
How Bitcoin reacted the last 11 times | Source: X @MaxBecauseBTC
Thus, today’s FOMC meeting is a watershed moment for financial markets globally, with significant implications for both traditional and crypto markets. As Altrichter succinctly puts it, “A Sept Fed rate cut has driven the 2024 bull market. Tomorrow’s meeting will either reinforce that tailwind or refute it. If the Fed signals a cut, the rally continues. No signal: markets could get ugly.”
In the lead-up to the Federal Open Market Committee (FOMC) meeting scheduled for Wednesday, March 20, the Bitcoin and crypto market is experiencing a severe downtrend. BTC price has plunged roughly -10% in the past two days, and Ethereum (ETH) is down -12% in the same period.
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.
Anna Wong, Chief US Economist for Bloomberg, remarked via X (formerly Twitter), “Another reason why FOMC [is] 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. “
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 @TheTerminal BECO models —> Fedspeak —> spectrometer) pic.twitter.com/Kney89BERM
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 stated via X, “If BTC is to be considered digital gold, it’s expected to mirror gold’s market movements, albeit with a higher degree of volatility. In the current climate, with the market bracing for the Fed’s upcoming meeting, macroeconomic factors momentarily take precedence, driven by recent developments in PPI and CPI figures.”
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, provided 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’.”
In a reflection of market sentiment adjustments, analyst @10delta on X pointed out the strategic positioning of investors in anticipation of the Fed’s rate decisions. “The market is currently pricing in a reversal to the November ’23 interest rate levels, a clear indication that investors are adjusting their expectations based on the Fed’s potential pivot signaled in the previous dot plot,” he noted.
Accordingly, he argues that the FOMC & dot plot will be a “buy the news” event as the market expectations are being properly adjusted. “The macro worries […] should dissipate & crypto idiosyncratic bullish factors, such as the ETF inflows […] as well as the BTC halving take hold. All considered I think there’s a good R/R for ‘buying the dip’ heading into the March 20 event,” the analyst added.
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. pic.twitter.com/0I1BPYiU8W
— Mike Zaccardi, CFA, CMT 🍖 (@MikeZaccardi) March 17, 2024
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.
Featured image from Shutterstock, chart from TradingView.com
Disclaimer: The article is provided for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.
In a week brimming with anticipation, the Bitcoin and crypto market is poised to witness a series of significant events that could steer the trajectory of digital assets. From pivotal price action in Bitcoin to crucial decisions by the US Federal Reserve (Fed), and from landmark trials to influential crypto conferences, the week is packed with developments that could have substantial implications for investors and the crypto industry alike.
So here’s a detailed look at the top four events that are expected to capture the market’s attention in the coming days.
#1 Bitcoin At $40,000 This Week?
Bitcoin’s recent performance has been nothing short of impressive. The leading cryptocurrency marked its highest weekly close since May 2022, with a 15% gain last week. The bullish sentiment is further fueled by the anticipation of a spot Bitcoin ETF. Currently, Bitcoin is in a consolidation phase, but renowned technical analyst, “Titan Of Crypto,” believes there’s more to come.
Bitcoin at $40,000 next week? BTC is trying to break out from both bullish pennant and the inside bar’s range. Tenkan starts pointing up. If the following conditions are matched: Kijun follows Tenkan, daily candle manages to close above the range and stay above $34.5k. [Then,] Bitcoin could teleport to $40k in a blink of an eye.
Bitcoin price prediction | Source: X @Washigorira
#2 Fed Rate Decision And FOMC
The Federal Open Market Committee (FOMC) is set to make its rate decision on Wednesday, November 1, 2023, at 2:00 pm, followed by a press conference with Fed chair Jerome Powell at 2:30 pm. The consensus among analysts is that the FOMC will maintain the target range for the federal funds rate at 5.25 to 5.5. The CME FEDWatch tool supports this, with 96.2% expecting no change.
CME FedWatch | Source: CME
Notably, market conditions have become far more fragile than they were a year ago. The Fed needs to navigate their battle against inflation carefully as it can’t afford a severe recession.
Bank of America commented on the upcoming meeting, stating, “We still do not expect a hike in November, as the Fed is clearly worried about the extent of financial tightening. But today’s robust spending and inflation data keep a December hike on the table.”
Goldman Sachs economists added, “Fed officials appear to have signaled that they will not be hiking at their November meeting next week… the story of the year so far has been that economic reacceleration has not prevented further labor market rebalancing and progress in the inflation fight.”
#3 Sam Bankman-Fried’s Trial Nears End
The high-profile trial of Sam Bankman-Fried, related to the collapse of the FTX exchange, is nearing its conclusion. As the trial resumes on Monday, October 30, 2023, Bankman-Fried will continue his direct examination by his defense lawyer, presenting an alternative narrative to the testimonies of former employees and witnesses against him.
Following this, the government will cross-examine him, potentially leading to a rebuttal case by the prosecution. This part of the trial is expected to consume most of the week, with the jury likely to make a decision by next week’s end.
#4 Solana Breakpoint Conference
Solana’s annual Breakpoint conference is set to kick off today in Amsterdam, the Netherlands. The event, which runs from October 30 to November 3, will feature Solana Labs CEO Anatoly Yakovenko, key project leaders from the Solana ecosystem, and speakers from Stripe and Visa.
Historically, Breakpoint has been a platform for significant announcements. Last year, Solana Labs unveiled a $100 million social media fund and a $150 million blockchain gaming fund. This year, there’s buzz around RNDR – Render Network’s team, which is expected to launch Render 2.0 soon. The entire conference will be livestreamed on X and Solana’s YouTube channel.
The U.S. economy has not only defied widespread predictions of a sharp slowdown. It’s grown even faster.
But that doesn’t mean a recession is far away. The U.S. has often experienced fast growth shortly before the bottom fell out.
Let’s start with the good news.
Gross domestic product, the official scorecard of the economy, looks likely to top 4% or even 5% annual growth in the third quarter. The government will release its preliminary estimate on Thursday morning.
Economists polled by The Wall Street Journal predict 4.7% GDP in the third quarter.
Other top forecasters see even faster growth. S&P Global estimates 5.6% GDP and the Atlanta Federal Reserve GDPNow forecast projects 5.4%.
How fast is that? GDP only topped 5% once from 2010 to the start of the pandemic in early 2020.
This is not what was supposed to happen.
After solid 2%-plus growth in the first and second quarters, the economy was widely expected to slow down in response to rapidly rising interest rates.
The Federal Reserve has jacked up borrowing costs in the past year and a half to try to tame inflation, a strategy that typical depresses consumer spending and business investment. Those are the dual engines of the economy.
To some extent the Fed has succeeded. Home sales and construction, for instance, have tumbled due to the highest mortgage rates in decades. And manufacturers have taken a hit as customers curtailed purchases of goods and big-ticket items.
The annual rate of inflation, meanwhile, has tapered to 3.7% as of September from a 40-year high of 9.1% in 2022.
Still, spending and investment have not dropped off nearly as much as expected. And there are two reasons for that.
The first is a strong and ultra-tight labor market, with unemployment hovering just below 4%. Most Americans who want a job have one, and as a result, they have been able to keep spending. Travel, recreation, leisure and hospitality have been the big winners.
S&P Global estimates a flush of consumer spending in the third quarter will account for just over half of the growth.
The industrial side of the economy, for its part, has been the beneficiary of tens of billions of dollars in subsidies from the Biden administration to support green energy and bring home more manufacturing.
The U.S. has also ramped up military aid to Ukraine and has to replace outgoing equipment, weapons and ammunition.
All the government money has helped to keep manufacturers from falling too far down the well. Government outlays could add as much as 0.6 percentage points to third-quarter GDP.
Making the third quarter look even better, the U.S. trade deficit fell sharply and is likely to add 1.0 percentage point or more to GDP.
A small rebound in the production of inventories, or unsold goods, would be the icing on the cake.
So the economy is doing great, right? Maybe not.
Consumers probably can’t keep spending at their current pace since their incomes are barely rising faster than inflation. Businesses are proceeding cautiously because of higher borrowing costs. And banks are more reluctance to lend.
Other restraints on the economy include higher gasoline prices and a surge in long-term interest rates that make it far more expensive to buy houses, cars, appliances and the like.
That’s why many forecasters believe the economy start to soften in final months of 2023. S&P Global, for instance, initially projects 1.7% growth in the fourth quarter.
Nor does the third quarter’s heady growth rate suggest there is no reason to worry about a recession. The economy has expanded rapidly just before the onset of prior recessions.
The economy grew at solid 2.5% pace right before the 2007-2009 Great Recession, for example. And GDP grew a frothy 4.4% in the first quarter of 1990 just several months before a recession started.
Many of the same economic headwinds, it turns out, are still in place that led to widespread Wall Street predictions of recession earlier in the year.
Indeed, some forecasters such as the Conference Board still insist a short recession is likely in 2024. Other economists are also on guard.
“I still believe a recession is coming — though far less severe than the 2008-2009 event,” said chief economist Steve Blitz of TS Lombard.
The Federal Reserve’s moves — or lack thereof — will affect everyone. And almost no one.
While market pundits have been trying to get their hands on the any indication of what the Federal Open Market Committee’s policy announcement will say on Wednesday, individual investors have stuck their hands in their own pockets and left them there.
The numbers: The cost of goods and services rose a mild 0.2% in June as inflation eased again, but another measure of prices favored by the Federal Reserve showed somewhat less progress.
Economists polled by The Wall Street Journal had forecast a 0.2% increase in the personal consumption expenditures index.
The increase in prices over the past year slowed to 3% from 3.8% and touched the lowest level since October 2021, the government said Friday.
The so-called core PCE rate of inflation, meanwhile, also rose 0.2% last month. The core rate omits volatile food and energy costs and is viewed by the Fed as a better predictor of future inflation trends.
The rate of core inflation over the past year slowed a bit less to 4.1% from 4.6% in the prior month, but that still puts it at a more than two-year low. It’s still far above the Fed’s 2% target, however.
Big picture: Inflation has slowed a lot this year due to falling energy and food prices, but the cost of living is still rising too fast to mollify the Fed or ease the financial pain of U.S. households.
The Fed is expected to keep interest rates high through next year to bring inflation down closer to its 2% target. The danger is that higher borrowing costs could also slow the economy enough to tip the U.S. into recession.
The latest PCE report is likely to give the Fed more reason for optimism, however.
Looking ahead: “Inflation cooled, but held well above 2%, meaning the Fed can’t declare mission accomplished,” said lead U.S. economist Oren Klatchkin of Oxford Economics.
Market reaction:The Dow Jones Industrial Average DJIA, +0.50%
and S&P 500 SPX, +0.99%
rose in Friday trades. The yield on the 10-year Treasury note TMUBMUSD10Y, 3.953%
slipped 3.96%.
Inflation in the U.S. has slowed from a 40-year peak of 9% last year, but prices are still rising rapidly and putting great stress on household budgets.
Topping the list is rent — the single biggest expense for people who don’t own homes. Putting food on the table, caring for young children and owning a car have also become a lot more expensive.
See the accompanying table to view where inflation is hurting Americans the most.
The cost of groceries isn’t rising as fast as it was last year, but putting food on the table is much more expensive now compared to a few years ago.
frederic j. brown/AFP/Getty Images
The latest consumer price index, due Tuesday, is likely to show a further slowdown in inflation. Yet the cost of many goods and services remains stubbornly high and isn’t coming down as fast as the Federal Reserve would like.
The Fed will meet Wednesday to weigh whether to raise interest rates for the 11th straight time since the spring of 2022. Wall Street widely expects the central bank will pause or skip a rate hike this month to see how much its prior increases are cooling off the economy.
The rate of inflation, based on the CPI, has decelerated to a yearly pace of 4.9% as of April.
The core rate that excludes food and energy has tapered off to 5.5% yearly pace from a peak of 6.6% last fall.
The bad news for the Fed is that core inflation, viewed as a more accurate predictor of future inflation trends, has gotten stuck at an uncomfortably high level.
The core rate has been flat at 5.5% to 5.6% since the start of the year, leaving it well above the central bank’s long-run target of 2% inflation.
The below is an excerpt from a recent edition of Bitcoin Magazine PRO, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.
The next FOMC meeting is on February 1, where the Federal Reserve will determine their next policy decision regarding interest rates. This article covers how the market expects the Fed to respond, what readers should watch for regarding changes in the expected path and the potential second-order effects of said changes.
The current expectation is an interest rate hike of +0.25%, with the market assigning a near 100% certainty of this outcome, setting the policy rate to 4.5%-4.75%.
The Fed’s expected course for 2023 is to keep rates elevated, with several Fed Governors recently stressing the need to keep policy rates sufficiently restrictive in order to make sure inflation does not stage a comeback after initial signs of slowing, like it did in the 1970s.
“So, as I mentioned, it is important that overall financial conditions continue to reflect the policy restraint that we’re putting in place to bring inflation down to 2 percent. We think that financial conditions have tightened significantly in the past year. But our policy actions work through financial conditions. And those, in turn, affect economic activity, the labor market, and inflation. So what we control is our policy moves in the communications that we make. Financial conditions both anticipate, and react to, our actions.
“I would add that our focus is not on short-term moves, but on persistent moves. And many, many things, of course, move financial conditions over time. I would say it’s our judgment today that we’re not at a sufficiently restrictive policy stance yet, which is why we say that we would expect that ongoing hikes would be appropriate.”
Pricing In The Transitory Inflation
Global risk assets have been in rally mode to start the year, as market participants increasingly expect the inflationary scare that rattled financial assets in 2022 to abate in 2023 and beyond. While the optimistic expectations for abating inflation would certainly be bullish for risk-assets — given that it would lead to the return of lower interest rates — one would be wise to keep in mind the frivolous nature of inflation forecasting from the Fed, as shown below. A return to the 2% target is nearly always the expectation.
With inflation abating and policy rates staying elevated, the market believes that a “sufficiently restrictive” policy will manifest in 2023, with 1.31% worth of cuts coming in 2024.
Expected rate cuts in 2024 priced by the market
Once inflation becomes entrenched into consumer expectations and labor markets, history has shown that it takes a monumental effort from central banks tightening policy rates in order to squash the inflation.
As noted by Liz Ann Sonders of Charles Schwab, the 6-month change in inflation expectations is the largest it’s been since 2011, an indication that monetary tightening has begun to work its way into the real economy.
With a rate hike of 25 basis points all but confirmed tomorrow, the market will pay close attention to the content and tone of Chairman Powell’s speech in regards to the future path of policy rates. We believe that “higher for longer” is a tone that the Fed will continue to communicate with the market.
However, on a long enough timeline, the inevitable outcome is clear. Just ask the U.S. Treasury for their projections…
The Federal Open Market Committee (FOMC) minutes which hinted towards a less hawkish approach in the coming policies are expected to start a rally in global equities. While in the domestic market, India’s forex reserves have grown by $2.537 billion to $547.252 billion for the week ended November 18. Some optimism also came as Fitch Ratings said India’s bank credit will see strong growth in the current financial year despite effects of higher interest rates.
Added to that Foreign portfolio investors have infused funds worth Rs 32,344 crore in Indian stock markets so far in November and became net buyers again along with this market participants also turned bullish with S&P Global Ratings’ latest report that the global slowdown will have less impact on domestic demand-led economies such as India, Indonesia and the Philippines. These positive signals helped the BSE Sensex to gain 574.86 points, or 0.92 per cent, at 62,868.5 during the week ended December 02, while the Nifty inclined 183.35 points, or 0.99 per cent, to 18,696.1.
Market veteran Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities, said: “Nifty and Sensex gained around 0.8% in the past week creating all-time highs. The BSE Midcap Index gained 1.63% while the BSE SmallCap Index gained 1.94%. A steady softening of global bond yields on expectations of ‘peak’ inflation and a decline in crude prices, helped equity markets continue the momentum and helped the Nifty-50 Index log its new all-time high on a closing basis.”
“FPIs were net buyers in the past five trading sessions, while DIIs were net sellers in the same period. Going forward, D-street will focus on macro trends. Going ahead, markets may be dominated by global news flows and steps taken by different governments to tackle their economies. On the economy front, Q2FY23 real GDP grew by 6.3%, while GST collections for October (collected in November) stood at Rs1.469 lakh cr (September: Rs1.517 lakh cr)” Chouhan added.
As many as 41 stocks in the Nifty 50 index delivered a positive return to investors in the passing week. With a gain of (5.8 per cent), Britannia Industries emerged as the top gainer in the index. It was followed by Tata Steel (up 5.5 per cent), Ultratech Cement (up 5.3 per cent), Bharat Petroleum Corporation (up 5.1 per cent), and Grasim Industries (up 5.0 per cent).
SBI Life Insurance Company, Hindalco Industries, Hero MotoCorp and Reliance Industries also advanced by over 4 per cent. On the other hand, Eicher Motors, Maruti Suzuki India and Coal India declined 2.4 per cent, 2.2 per cent and 2.1 per cent, respectively.
Sector-wise, the BSE Realty index gained 4.2 per cent during the week gone by. BSE Metal has also given a 3.4 per cent return. While, BSE Fast Moving Consumer Goods, BSE Information Technology, BSE Oil & Gas, BSE Carbonex, BSE Teck and BSE Healthcare indices also surged more than 1 per cent during the week.
Market strategist Vinod Nair, Head of Research at Geojit Financial Services, said: “The rally in the domestic market was halted by negative cues from global counterparts and broad-based profit booking in large caps. The correction in the market was led by auto stocks as the sales data came in lower than expected due to weaker exports and sequential de-stocking. Declining manufacturing activity in the US is proof that the central bank’s policy tightening has started to show results, which in turn will encourage the Fed to keep rate hikes at bay.”
“Fed Watch” is a macro podcast, true to bitcoin’s rebel nature. In each episode, we question mainstream and Bitcoin narratives by examining current events in macro from across the globe, with an emphasis on central banks and currencies.
In this episode, CK and I cover Jerome Powell and the FOMC policy decision in depth, analyzing statements from the Federal Reserve, Powell and other financial experts. Then we move onto charts, starting with bitcoin and the dollar, then moving on to Treasury rates. Lastly, we discuss the diesel shortage brewing on the east coast of the U.S.
Federal Reserve FOMC Raises Rates Again
CK and I agree that the level of importance of the Federal Reserve and the FOMC policy decision to the market is a sign of a very unhealthy economy, where central bank decisions are the only game in town.
The Fed raised interest rates by 75 basis points (bps) to a new Fed Funds target range of 3.75% to 4%. This was not a surprise. The market had been predicting the Fed to not pivot away from their course in this meeting, despite the global liquidity concerns appearing in the financial system.
The central bank maintained their policy trajectory, but the statement did contain some softening of their hawkish tone. The sentence that jumps out is the following:
“In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
“Cumulative” is the word people are focusing on. What does “cumulative” mean in this context?
The Fed is placing their meeting-to-meeting decisions within a broader scope of their tightening program as a whole since March 2022, as well as considering their globally important role. The reasoning Powell portrays in the press conference that followed is mixed. They want to place their decisions within a whole program, but also want to be data dependent on a meeting-to-meeting basis.
Overall, I think that their intention is to cause uncertainty. Uncertainty is key at the end of a hiking cycle. The Federal Reserve’s intention is to cause an economic slowdown to bring demand down to be in line with supply, but they can’t do that if the market is frontrunning the end of the hiking cycle.
That’s exactly what we’ve seen over the last several months. I’m sure Powell has mixed feelings about the stock market remaining resilient to their hiking, with the S&P 500 above where it was at the time of the June meeting’s hike. That was three meetings with 75 bps hikes, yesterday made it four, and yet the stock market was higher. He wants a “soft landing” — to achieve their policy goals without major damage to the economy — but at the same time their goal is to damage the economy. It’s a contradictory tightrope they are trying to walk.
The intentions of the last few hikes in the tightening program cannot be achieved if the market is frontrunning their slowdown, the pause, and then the eventual reversal. This is where the purposeful uncertainty comes in. If the Fed can send mixed messages and keep the market uncertain, the effects of their last few hikes can be more significant.
Charts
The charts on Fed Day were moving quickly. I delayed taking snapshots until 30 minutes after the Fed’s announcement, but the mixed messaging from Powell caused them to swing wildly. I won’t post them here because they are already out of date, but you can look at them on the slide deck for this episode.
The initial reaction was consistent across the board. Markets took the written statement, including the new language about cumulative effects, as a dovish pivot. Bitcoin spiked along with stocks and the dollar moved down.
However, as soon as Powell started to take questions at the press conference, and with his mixed messaging detailed above, markets reversed. Bitcoin and stocks headed down, the dollar up.
The one chart I will include on this companion post to the podcast is that of the 3-month and 10-year Treasury rates showing the most important inversion in the curve.
3-month and 10-year Treasury securities, in relation to the Fed Funds target range
What you can notice on this chart is the 3-month yield going higher than the 10-year yield. Also, the 10-year yield is awfully close to being inside the Fed Funds target range.
What I’ve been saying for months is that the Fed will continue to raise rates until the market forces them to stop. That force applied by the market will show up as longer term rates simply not obeying the Fed anymore and going lower, like we can see with the 10-year yield here.
The Fed is admittedly “data dependent.” They tell us they are followers, but if you want to know where the Fed is going, all you have to do is look at the yields. If government security yields start heading down into the Fed Funds target range, by the next meeting their choices will be: raise rates again and lose confidence that they are in control of anything, or pause, or even do a “mid-cycle adjustment” and lower them. Powell has done what he calls a mid-cycle adjustment before. Back in 2019, the first rate cut in July was downplayed as just such a move. Of course, it was then followed by massive cuts in the following months.
Diesel Shortage
There are other things happening in the economy than the Federal Reserve. There is concern about diesel shortages in the U.S. Reports are flying about there being only a couple weeks of diesel left in storage, and with the winter coming on, diesel and heating oil demand is set to increase.
To cover this story, I read from a great article by Tsvetana Paraskova. She covers the shortage and reasons behind it in great detail.
In short, U.S. refinery capacity is down due to some plants being switched to making biofuel and our imports from Russia are non-existent due to crazy sanctions.
On the show, we get sidetracked because I am not personally that worried about the diesel shortage. It will cause some pain, but the solution is through that pain. Higher prices will cause one of two things to occur — or both: higher prices will stimulate more production or higher prices will cause political changes to allow higher production.
There is an almost universal fear of higher prices and they are demonized as “inflation” at every turn. Of course, high prices aren’t bad if you are a producer. They aren’t bad in general, either. Prices are supposed to be neutral and give you information about the economy. The only price changes that are a net negative are those due to changes in the money supply. Since our current economic condition is not due to money printing but instead supply crises and bad government policies, the price increases are necessary to fix the problems today.
This is a guest post by Ansel Lindner. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.
The Federal Open Markets Committee, the U.S. central bank’s body responsible for setting monetary policy, raised interest rates by 75 basis points on Wednesday for the fourth consecutive time as Federal Reserve governors attempt to battle stubborn inflation levels in the country.
Jerome Powell, Chairman of the Federal Reserve and the FOMC, joined a group of journalists for a press conference shortly after the data release, shedding more light on the central bank’s thoughts for future action.
Markets reacted positively to the 0.75% interest rate increase, which came in as expected, but trading became more volatile as the chairman started its speech. While the written statement announcing the interest rate decision showed a new dovish sentence, further fueling the rally, Powell’s press conference combated that feeling as the Fed Chair reiterated previous guidance.
“In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” the FOMC statement read, hinting at a more dovish Fed.
Powell, however, highlighted that the “ultimate level of rates will be higher than previously expected,” triggering an acute market drawdown.
The feeling markets are left with is of confirmation that a slow-down is near but surprise when it comes to the terminal funds rate, something that can be attested by the upswing and consequent downswing in the S&P 500 index.
The S&P 500 shoot up at 14:00 EST (2 p.m.) as soon as the FOMC statement was released with the more dovish language, only to come back down as Powell’s press conference began thirty minutes later. Investors likely left the livestream with a sour taste in their mouths, judging by the continued drawdowns in the index. (Chart/TradingView)
Bitcoin mirrored stock market moves, albeit falling less in percentage terms. At the time of writing, BTC is accumulating a 1% drawdown, while the S&P 500 ended the trading day bleeding by over double that amount (2.39%). The Nasdaq was seeing a similar fate, but extended its losses to 3.15%.
The fact that Bitcoin has been the least volatile of the three is quite remarkable as it defies history and mainstream media narratives altogether. While the peer-to-peer currency is still correlated with stocks, it isn’t the one doing the most severe swings, and that is going by unnoticed.
The below is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.
November FOMC Meeting
All eyes across global markets are on the November FOMC meeting. At this point in the global liquidity cycle, seemingly every asset class is part of the same implicit trade. The tough talk from the Fed, the central bank of the dollar indebted world, has held up so far in 2022, as they embark upon the fastest tightening cycle in modern history.
Consensus for the size of the rate hike is 75bps, which would raise the policy rate to 4.00%.
Consensus for the size of the rate hike is 75bps, which would raise the policy rate to 4.00%.
Much of this hiking has already priced itself into the front end of the U.S. Treasury curve, which has led to all sorts of inversions across various maturities.
In terms of the yield curve, across any duration that matters, an inversion has happened — a phenomenon that typically occurs before an economic slowdown, as short term yields rising disincentivizes the investment of capital over long durations due to “attractive” short end yields. Lend your money to the U.S. government for 30 years and lock in 4.13% or for three months at 4.13% and reevaluate then? Duration risk is real and the pace of this tightening cycle on the backs of record inflationary conditions across the globe has left investors uneasy on the long-term prospect of government paper. No kidding.
U.S. Treasury yield curve inversion with short-term yields higher than long-term yields.
Arguably, the Fed is still behind the curve and, per their mandate, shouldn’t have “let” inflationary pressures get this out of control while still stoking the flames with zero-interest rate policy and $120B/month of quantitative easing bond purchases. Due to the blunder and subsequent hit to their credibility, the Fed is attempting to induce pain in the labor market and in asset prices until inflationary concerns abate.
It’s a bold strategy and it’s one that is entirely destined to fail. But they’ll likely end up crashing everything while trying. However, the nominal economy — meaning gross domestic product expectations (not inflation adjusted) and the labor market — is still piping hot. The market looks to be believing that Fed policy is in an entirely new regime going forward.
Shown below is the bitcoin price with its average on-chain holder cost basis (realized price). Bitcoin is in a classic bear market consolidation phase, that many may not have more pain ahead. These periods, where panicked/leveraged investors transfer their holdings to the prudent and well capitalized, are what create the conditions for the next bull run.
