Bitcoin could expect volatility as Fed interest rate decision approach this week
The US Federal Reserve’s (Fed) interest rate decision on Wednesday could bring volatility for risky assets like Bitcoin.
Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank Ltd, posted on Monday that “The Fed is set for an almost certain no action as the Fed members will certainly want to consider the risks to inflation posed by Donald Trump’s various growth-boosting and trade-restricting policies.”
Ozkardeskaya further explained, “The US yields are softer this morning on news that Trump will not impose 25% tariffs on Colombia as he said he would a few hours before, but the dollar index kicks off the week with a rebound above the 50-DMA. Despite Trump’s willingness to push the Fed for unnecessary rate cuts to boost the economy, the US economy doesn’t necessarily need a boost”.
“The jobs number keep coming unexpectedly strong and growth remains robust thanks to solid consumer spending. The Q4 growth update for the US economy will be released on Thursday this week, and may show that the US economy grew 2.7% last quarter – slightly lower than 3.1% printed at the last update – but the price pressures may have increased from 1.9% to 2.5%. And the rising price pressures - while growth nears 3% - is certainly not favorable for further rate cuts,” said the analyst.
Additionally, Kathleen Brooks, Research Director at XTB UK, posted that “all eyes will be on how Fed chair Jerome Powell will react to Donald Trump’s call for the Fed to cut interest rates. With the Fed expected to remain on hold, they could find themselves in the middle of a political storm. The main event for financial markets is not just what the Fed does, it is also how Donald Trump reacts to it.”
A hawkish Fed often leads to higher interest rates, which makes US government bonds and other Dollar-denominated investments more attractive, thus making risky assets like Bitcoin less attractive.
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