The USA implemented a tightened monetary policy to combat rising inflation since the end of 2021 and continued by increasing interest rates.
While inflation started to cool down in the USA, which is struggling with the highest inflation of the last 40 years, the FED did not increase the interest rate in November and kept it constant between 5.25% and 5.5%.
At this point, while all eyes are on the FED's interest rate decision to be announced at 22:00 (UTC 19:00), expectations are once again focused on the FED keeping interest rates constant.
According to CME Group's FED Watch tool, the probability of no interest rate increase on December 13 is priced at 98.3%.
Although expectations are for interest rates to be kept constant, the markets will closely follow possible changes in the interest rate decision text and the verbal guidance of FED President Jerome Powell at 22:30, rather than the interest rate decision.
At this point, the signals from the policy text and the statements of Fed Chairman Jerome Powell are expected to have an impact on asset prices.
Additionally, markets will try to understand from the policy text and Powell's statements whether the FED intends to cut interest rates in 2024.
While the expectation that the Fed would start reducing interest rates towards the end of the first half of 2024 was dominant in the markets, Powell stated that the data should be followed in order to reduce the interest rates at each meeting and that action would be taken in light of the data.
As you may remember, in his speech at Spelman College in Atlanta at the beginning of December, Powell stated that it was still too early for interest rate cuts and easing and said, “It would still be too early to conclude that we have reached a sufficiently restrictive stance or to comment on when the policy may be loosened. If necessary, we will continue to tighten further.” “We are ready and the FED will increase interest rates again if necessary to reduce inflation. The FED policy rate has entered the restrictive zone, but the FOMC continues to act carefully.” He gave the message that they could progress more firmly.
Bitcoin (BTC) hit its peak of $69,000 in November 2021, when the FED began increasing interest rates. Since the subsequent bear market is directly related to the FED's interest rate increases, it is thought that a policy change here may end the bear market and BTC may return to its old days.
*This is not investment advice.