The Federal Reserve's interest rate meeting on March 19 is highly anticipated. Despite the Fed's ambiguous stance, the market has already priced in its interest rate cut path, with expectations for the number of rate cuts in 2025 changing from 1 to 3. The rate cuts from other central banks also confirm global monetary policy easing, and market liquidity is gradually recovering. If the Fed hints at a rate cut in May during the meeting, market sentiment will quickly turn optimistic. This meeting may also discuss reducing the balance sheet, and the Fed may pause quantitative tightening (QT).
During the pandemic, the Fed engaged in massive quantitative easing, purchasing government bonds to inject liquidity, which expanded the balance sheet. After inflation soared in 2022, the Fed reduced its balance sheet through QT to curb inflation. According to Turf Nation data, the inflation rate in the U.S. has decreased, but the reliability of the data is disputed. They believe that the official CPI inflation rate in the U.S. is likely to decrease in the next 30 to 60 days, and attention should be paid this Wednesday to whether February's inflation rate declines as expected.
The Fed's balance sheet holds a large amount of debt instruments, such as U.S. Treasury bonds. When assets mature, if the bonds are allowed to mature naturally without reinvestment, continued QT will tighten liquidity; if refinancing is chosen, using maturing funds to purchase new bonds may partially halt the reduction of the balance sheet or even increase market liquidity. Additionally, the U.S. dollar continues to weaken, and if this trend continues, it will encourage more funds to flow into risk markets, pushing up Bitcoin prices. #加密市场回调 #美国犹他州比特币法案
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