The tense anticipation surrounding the Fed’s decision continues in Bitcoin and altcoins. At this point, divergences in opinion have deepened in the market ahead of the Fed’s interest rate decision today.
At this point, Citadel Securities, a US giant managing $67 billion in assets, argues that the Fed will surprise markets by raising interest rates by 25 basis points, while most analysts expect rates to remain unchanged.
While the general consensus is that there will be no change, the market is not entirely ruling out a rate hike. According to the CME FedWatchTool, the probability of the Fed keeping rates unchanged in July is priced at 68.5%, while the probability of a 25 basis point increase is priced at 31.5%.
Speaking to Coindesk, Frank Flight, Head of Macro Strategy at Citadel Securities, stated that Federal Reserve Chairman Kevin Warsh might make a surprise interest rate hike at this meeting to demonstrate his commitment to fighting inflation.
According to Flight, such a move would signal the end of the Fed’s long-standing practice of signaling policy changes and strengthen the central bank’s independence. It could also enhance the Fed’s credibility in its fight against inflation.
Flight also argued that the Fed’s move to raise interest rates this week would have a stronger impact than waiting until September. According to Flight, a surprise rate hike could increase confidence in the Fed’s commitment to fighting inflation, while also influencing corporate pricing behavior and employee wage expectations, thus preventing a larger tightening in the long run.
Flight also added that a surprise Fed interest rate hike could put short-term pressure on risky assets, including Bitcoin, if it pushes up Treasury bond yields.
*This is not investment advice.