Fed’s Decreased Likelihood of Rate Hike May Affect Cryptocurrency Market in the Next Week
In the world of finance, the latest round of bailouts has sent shockwaves throughout the market. The CME FedWatch Tool, which predicts the likelihood of interest rate changes by the U.S. Federal Open Market Committee (FOMC), has recently reported a drop in forecasted rate hikes just nine days before the FOMC meeting. This news is making investors rethink their investment strategies and adjust their portfolios accordingly.
According to the CME FedWatch Tool, the FOMC’s forecast of a 50 basis point (bps) rate hike has dropped from 40% a day ago to 18.1%. Meanwhile, the probability of a 25 bps increase has risen to 81.9%. This sharp decline in the forecasted rate hike can be attributed to the recent round of bailouts, which have injected a significant amount of liquidity into the market.
The recent stimulus packages, which have been put in place to help mitigate the economic impact of the COVID-19 pandemic, have increased the money supply and lowered borrowing costs. This has led to a decrease in demand for bonds, which are used to finance government debt. As a result, the yield on U.S. Treasury bonds has risen, and the probability of an interest rate hike has decreased.
Investors will be eagerly awaiting the release of the U.S. February Consumer Price Index (CPI) data on Tuesday, March 14, which will provide further insight into the health of the economy. This data will be crucial in determining the final interest rate hike by the FOMC on March 22. If the CPI data shows that inflation is rising faster than expected, the FOMC may choose to increase interest rates by more than the predicted 25 bps.
The news of the decreased likelihood of a 50 bps rate hike is already having an impact on the market. Investors are moving their money out of bonds and into riskier assets, such as stocks, cryptocurrencies, and commodities, which are expected to perform well in a low-interest-rate environment. This shift in investment strategy is causing the stock market to rally, with major indices like the S&P 500 and the Nasdaq Composite reaching all-time highs.
What effect will there be on the cryptocurrency market in the next week?
It’s difficult to predict with certainty how the recent decrease in the likelihood of a 50 basis point rate hike by the US Federal Reserve will affect the cryptocurrency market, including Bitcoin, in the next week. However, there are some factors that could potentially impact the market.
First, if the CPI data, which will be released on March 14, shows higher-than-expected inflation, it could lead to a further decrease in the likelihood of a rate hike by the Federal Reserve. This could be seen as positive news for cryptocurrencies, as they have historically performed well in low-interest-rate environments.
Second, the recent stimulus packages and the injection of liquidity into the market could potentially lead to an increase in demand for cryptocurrencies as investors look for alternative assets that could provide higher returns. This could potentially lead to an increase in the price of Bitcoin and other cryptocurrencies in the short term.
However, it’s important to note that the cryptocurrency market is highly volatile and subject to sudden price movements, which could be triggered by a variety of factors such as regulatory changes, news events, or global economic developments. As such, it’s always important to exercise caution and perform thorough research before making any investment decisions.
Conclusion
In conclusion, the recent round of bailouts has had a significant impact on the likelihood of an interest rate hike by the FOMC. The drop in forecasted rate hikes has caused investors to shift their investment strategies, resulting in a rally in the stock market. However, the release of the February CPI data on Tuesday, March 14, will be crucial in determining the final interest rate hike by the FOMC on March 22. Investors will be eagerly awaiting this data to determine their next moves in the market.
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