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Ahead of the Federal Open Market Committee (FOMC) meeting, US investment advisor Vanguard warned that the central bank may not have been done with raising interest rates just yet. It said the US Fed may have to keep the monetary policy at restrictive level further than expected by the majority market participants.
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High Inflation Means No Rate Relief Yet?
Vanguard’s statement comes a week after Blackrock executive Rick Rieder taking a similar view on the Fed’s policy stance amid possibility of inflation continuing at higher levels. Reuters reported Rieder’s statement: “There is a ‘worrisome’ possibility of inflation running at higher levels, over time, than before the COVID-19 pandemic due to structural factors such as larger government deficits and sizeable debt levels.”
In this context, Vanguard said the US central bank may need to continue hiking interest rates further than many people expect and keep borrowing costs high through late 2024. There is a wide consensus already that the Fed will keep the interest rate unchanged in the upcoming meeting but traders would be keen to hear statements on future rate decisions during the Powell speech. According to a recent Reuters poll, chances of the US Fed rate cuts may brighten between April and June 2024.
Bitcoin Price: Temporary Spike During Powell Speech?
Warnings of the US Fed’s consideration of further rate hikes could likely spur a temporary spike in Bitcoin price. Following the Powell press conference around the July 2023 FOMC Meet, the stock indices as well as BTC showed little volatility over the Fed Chair’s restrictive statement on possible rate hikes in future.
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