The Federal Open Markets Committee (FOMC) will make its next policy interest rate announcement on Wednesday, which analysts say likely will—and should—remain flat.
According to the CME FedWatch tool, investors price in a 99% likelihood of a flat rate on Wednesday.
If that happens, it’s likely to be bullish for Bitcoin (BTC), whose price has historically correlated with risk equities and central bank policy. The more favorable credit conditions are in the economy, the more likely BTC is to pump—and vice versa.
“The political calculus is the Fed should not raise again,” said Wharton Finance Professor Jeremy Siegel in an interview with CNBC on Tuesday. Any continued hikes, he claimed, might be “the straw that breaks the camel’s back,” leaving vast numbers of people unemployed while only squeezing “a point or two off super core inflation.”
Siegel’s position stands in stark contrast to March of last year, when the Federal Reserve was early in its hiking cycle, and he championed rate hikes in order to “defend the dollar.”
Given the current strength of the economy based on real economic data, Siegel thinks the stock market may be strong for the next few months. “I think we could still have a firm equity market through the end of the year,” he said.
Bitcoin rose aggressively to new highs from March 2020 to early 2021 after the Federal Reserve lowered its benchmark interest rate to just 0.25%. In a similar fashion, popular crypto YouTuber and trader Sem Agterberg, who goes by Crypto Rover on Twitter, believes a 0% rate increase tomorrow could be “bullish for Bitcoin.
The Fed pivoted in 2019 when it cut interest rates three times in response to a slowdown in the global economy. This pivot helped to prevent a recession.
Also 1990 and 1994 massive rate cuts and SP500 went parabolic! 📈📈💵💵 pic.twitter.com/8JrXS3k9hp
— Seth (@seth_fin) September 18, 2023