For crypto and the broader financial market, FOMC day is upon us once again today. And analysts agree that today’s meeting will be one of the most important in recent years. Kurt S. Altrichter, financial advisor and founder of Ivory Hill, even describe today’s FOMC meeting as the “most important of his life.” In a new post on X, Altrichter explains why.
FOMC Preview
At the heart of today’s FOMC meeting is the Federal Reserve’s potential indication of a rate cut in September. According to Altrichter, financial markets are almost unanimously anticipating this move, with Fed funds futures indicating a near-certain probability of such an outcome.Market expectations is a strong signal for a rate cut in September,” Altrichter points out, marking today’s update as a crucial moment for financial markets.
The key question for today is: “How strongly is the Fed signaling a rate cut in September?” the expert explains. Investors are advised to pay close attention to the FOMC statement at 2:00 pm ET, especially the third paragraph, which may subtly signal the Fed’s confidence in hitting its inflation targets.
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Altrichter advises: “See the third paragraph for this key phrase: The Committee does not expect it to be appropriate to narrow the target range until it gains greater confidence that inflation is moving sustainably toward 2 percent.” Any change in this wording would be a clear signal that the Fed is moving closer to its inflation control goals, potentially paving the way for rate adjustments.
Altrichter outlines several potential outcomes from the meeting, each associated with specific market reactions. In a dovish scenario, the Fed signals a rate cut for September. After that, Altrichter expects a broad-based market recovery, especially in sectors that are less sensitive to interest rates. “Yields and the dollar should decline modestly with a modest recovery in commodities,” Altrichter predicts, suggesting significant moves in both the benchmark and sector-specific indexes.
In a hawkish scenario, there will be no change in the US central bank’s forward guidance. If the Fed maintains its current stance without hinting at future cuts, markets could see a slowdown. “Look below and expect a sharp decline. The SPX should fall 1-2%,” he warns, noting that technology and growth sectors could outperform relatively due to their attractiveness during periods of higher yields.
How will Bitcoin and crypto react?
Potential adjustments in US monetary policy have direct consequences for the Bitcoin and cryptocurrency markets. Cryptocurrencies, often seen as alternative investments, react sensitively to changes in monetary policy, especially when it comes to interest rates.
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If the dovish scenario materializes, it could make Bitcoin and cryptocurrencies more attractive. A signal of lower future rates could drive increased investment in the crypto market, potentially leading to price increases as investors seek higher returns in alternative assets.
On the other hand, if the Fed signals reluctance to cutting ratesindicating a stronger economic outlook or inflation concerns, this could strengthen the US dollar and increase yields on traditional financial instruments. Such an environment could lead to a pullback in crypto markets as the comparative advantage of Bitcoin and cryptocurrencies diminishes in the face of strengthening traditional yields.
Max Schwartzman, CEO of Because Bitcoin Inc, commented via X: “The FOMC is (today) and it’s incredibly important as we come to the end of this fueled cycle… Here’s how the last 11 meetings have gone for Bitcoin…”
Thus, today’s FOMC meeting is a watershed moment for financial markets around the world, with significant implications for both traditional and crypto markets. As Altrichter succinctly states: “A Fed rate cut in September fueled the 2024 bull market. Tomorrow’s meeting will either reinforce that tailwind or refute it. If the Fed signals a cut, the rally continues.No sign: Markets could get ugly.”
At the time of writing, BTC was trading at $66,462.
Featured image from Shutterstock, chart from TradingView.com