Sign Up on MEXCFOMC Meeting: US Fed Resumes Bond Purchase, Is Interest Rate Cut Ahead?
Highlights
- After 3-years, the Federal Reserve has started buying bonds again
- Speculation is growing ahead of May 7 FOMC meeting on whether a rate cut is ahead
- Risk assets like Bitcoin is set to benefit from latest Federal Reserve liquidity injection
Ahead of the US Federal Reserve FOMC Meeting on May 6, the market is analyzing the impact of its latest move to resume bond purchases. Over the past few weeks, Fed Chairman Jerome Powell has waded off pressures to lower interest rates at a time when pundits believe this move could revive the market. However, the apex bank resumed bond purchases, fueling more speculation on what this move means for the broader financial market.
FOMC Meeting and the Bond Purchase Twist
The US Federal Reserve has initiated its biggest 3-year bond purchase since 2021, according to an X update from Money Guru Digital. The bank injected $20 billion daily, as shown in the Treasury auction results. With expectations for interest rate cuts at the FOMC meeting slated for May 7.
It is worth noting that this liquidity injection marks a big statement from the Fed as it suggests the bank is addressing lingering financial stress. This level of capital injection was last seen during the COVID-19 pandemic, a comparative measure to stabilize the market.
Amid the ongoing U.S.-China trade war and changing market realities, Fed Chair Jerome Powell is acting more cautiously. Despite the tempered approach to the market stabilizing plans, the exact policy update from tomorrow’s meeting can change the market trend.
Interest Rates Difference: Jerome Powell and President Trump in Spotlight
Outside the FOMC meeting, Jerome Powell and US President Donald Trump have clearly different views on how to handle the economy. As CoinGape reported earlier, President Trump urged the Fed to lower interest rates ahead of Wednesday’s meeting.
The premise hinges on inflation being under control. It is pegged at 2.39%, down from 2.82% in March. Despite the tariff war, this inflation is closer to the benchmark 2% annualized target set by the Federal Reserve.
It remains unknown what the Fed’s position is, but bond purchases might provide short-term relief for the financial market overall.
Key Implications for Bitcoin and Risk Assets
Historically, risk-on assets like Bitcoin are known to react to FOMC meeting decisions. A lowered interest rate will make the yield on crypto assets more attractive to investors.
After an intense volatility earlier in the trading day, Bitcoin price has reclaimed the $95,000 mark amid a 1.3% rally. Altcoins are also responding to the potential interest rate update tomorrow with Ethereum, XRP, and Solana paring off their daily losses.
Per an earlier BTC price review, the coin has a potential $100,000 breakout thesis. Irrespective of the direction of the Fed on Wednesday, a move that may also materialize if the Fed continues to inject liquidity into the market.
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