Why Traders Obsess Over the Fed and How to Track It đ
The Federal Reserve is the central bank of the United States. Its most powerful tool is the federal funds rate, which is the short-term interest rate banks charge each other. This rate influences all borrowing costs in the economy â from mortgages to business loans.
âŹïž When the Fed raises rates, borrowing gets more expensive and liquidity tightens. That usually puts pressure on stocks and crypto. Lower rates make money cheaper, encourage risk-taking, and often send prices higher. Thatâs why rate changes affect your crypto bags more than you think.
Tomorrow, on June 18, the Fed will announce its next rate decision. Traders expect no changes. Hereâs what the market is pricing in, according to CME FedWatch Tool:
âș June 18 â 99.8% chance of no change
âș July 30 â 87.5% chance of no change
âș September 17 â 57.9% chance of 0.25% cut and 7.6% chance of 0.50% cut
FedWatch Tool by CME tracks these probabilities using interest rate futures. It gives traders a real-time view of how markets expect the Fed to act.
Crypto is sensitive to rate expectations because liquidity fuels speculation đ
Letâs say traders expect a 0.25% cut with 60% probability, but the Fed goes for a 0.50% cut instead.
đŻ Markets would likely go wild. Stocks and crypto could pump hard, depending on how unexpected this decision was and what Fed Chair says during the press conference.