KeyTakeaways:
- Federal Reserve set to keep interest rates unchanged after strong US job data.
- CME FedWatch shows a 93.6% probability of no rate change in January.
- Inflation data and strong job growth suggest a hawkish Fed stance.
The Federal Reserve’s upcoming FOMC meeting, scheduled for January 28th and 29th, is drawing attention, especially within the crypto community. With the potential for the Federal Reserve to hold interest rates steady, market participants are bracing for potential impacts on risk assets like Bitcoin and the broader crypto market.
Recent data suggests the Fed will refrain from making further rate cuts following a strong December jobs report. The U.S. nonfarm payrolls data revealed a significant increase of 256,000 jobs, signaling a robust labor market.
Consequently, this data has heightened expectations that the Fed will maintain current interest rates at its January meeting, a scenario that could be unfavorable for digital assets. According to CME FedWatch, there is a 93.6% likelihood that the Federal Reserve will not alter rates in the upcoming meeting.
This follows the decision made at the December 2024 FOMC meeting, where the Federal Reserve reduced rates by 25 basis points, signaling a more cautious approach to tightening monetary policy. However, Jerome Powell’s comments during the meeting indicated a more hawkish tone, implying that the Fed could hold steady or act cautiously moving forward.
Bitcoin and other cryptocurrencies are facing increased pressure as traders anticipate that the Fed’s cautious stance may dampen risk appetite. Following the release of the December jobs report, Bitcoin experienced a sharp drop, falling to $92,000 as the market adjusted to the reduced likelihood of a rate cut in January.
The prospect of steady interest rates has caused some investors to adopt a more risk-averse approach, contributing to the bearish sentiment surrounding crypto markets.
In addition to the jobs data, traders will closely monitor upcoming inflation reports, with the Producer Price Index (PPI) set for release on January 14th and the Consumer Price Index (CPI) due on January 15th. These inflation metrics are expected to be crucial in shaping the Federal Reserve’s stance on future monetary policy decisions.
The PPI is forecast to rise by 3.0% year-on-year, while the CPI is expected to show a 2.8% increase, signaling persistent inflationary pressures. These reports will likely influence the Fed’s decision-making process and provide additional insight into the trajectory of interest rates for the remainder of the year.
