Bitcoin (BTC) started the new week with a decline, but critical developments are expected this week.
First and foremost is the US Federal Reserve’s interest rate decision, with the Fed announcing its first interest rate decision of 2026 on Wednesday.
How Will Powell Speak? A Hawk or a Dove?
After the Fed’s interest rate cuts in the final months of 2025, it is widely expected to keep interest rates unchanged. Markets are pricing in a 97% probability of the Fed keeping rates stable.
However, what Federal Reserve Chairman Jerome Powell says will be far more important than the decision itself. The tone of Powell’s statements about the future policy path could increase volatility in both traditional financial markets and cryptocurrencies.
At this point, Powell’s statements are more important than the interest rate decision itself. While it remains to be seen whether Powell will adopt a hawkish or dovish tone, a hawkish message could highlight inflation risks and put pressure on Bitcoin and cryptocurrencies.
Conversely, a dovish stance and a signal regarding the possibility of resuming interest rate cuts in the next few months could support an uptrend for BTC and stocks.
At this point, Morgan Stanley expects the Fed to send a dovish signal by maintaining the phrase “evaluating the scope and timing of further interest rate cuts” in its written statement.
While the general market expects interest rates to remain stable, JPMorgan is in the minority. Most companies, excluding JPMorgan, expect the Fed to cut interest rates once or twice in the remainder of the year. In contrast, JPMorgan predicts no rate cuts this year and a rate hike next year.
As you may recall, Powell indicated in a speech last December that interest rate cuts would occur sometime later in 2026.
Similarly, Minneapolis Fed President Neel Kashkari recently stated that “it’s too early to talk about interest rate cuts.”
According to the CME FedWatch tool, the probability of the Fed keeping interest rates unchanged in the 3.5%-3.75% range is priced at 97.2%.
*This is not investment advice.