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Highlights
- Traders say there is a 99.5% chance that the Federal Reserve will keep rates unchanged following its FOMC meeting.
- The US CPI data and Job data have suggested that the Fed is likely to keep rates unchanged.
The second day of the January US FOMC meeting is underway today, after which the Federal Reserve will announce its interest rate decision. This will be the first Federal Reserve interest rate announcement since Donald Trump took office and is significant, especially considering the impact it has on the crypto market.
US FOMC Meeting Today: Will The Fed Announce An Interest Rate Cut
All eyes are on the US FOMC meeting today as the Fed will announce its interest rate cut decision following its 2-day meeting, which began yesterday. CME FedWatch data shows that there is a 99.5% probability of the Federal Reserve keeping rates unchanged at the current rate of 4.25% to 4.5%.
Since the December FOMC meeting, traders have been betting on the likelihood of the Fed keeping rates unchanged at this January meeting despite the fact that the US Central Bank announced a 25 basis point cut at that meeting, which marked the third consecutive cut in 2024.
This sentiment from traders came following Jerome Powell’s speech, in which he suggested that the Fed was hawkish despite the interest rate cut. Since then, macro data have also strengthened the case for rates remaining unchanged.
CoinGape recently reported that the December US CPI report showed that inflation jumped to 2.9%, as expected. Although in line with expectations, this highlighted the inflationary pressure in the country, a development that could make the Central Bank skeptical about cutting rates.
The US PPI data provided some optimism as it showed the inflation rate at 3.3%, lower than expected. However, it is worth mentioning the strong US job data that came in at the start of the year, which suggested that there was no need for the Fed to cut rates over concerns in the labor market.
What Experts Are Saying
Experts have also weighed on what the Federal Reserve interest rate decision is going to be following the FOMC meeting today. Bank of America’s head of US rates strategy, Mark Cabana, opined that the Fed is likely done with rate cuts for now.
Speaking at the Charlotte Economic Club event, Cabana explained that the Fed is unlikely to proceed with its quantitative easing policy except if there is evidence of the US economy being in an unhealthy state. The market expert believes that the current interest rates are perfect for the state of the economy.
At the start of the year, Robert Kaplan, Goldman Sachs Vice President, opined that the Fed would likely hold off on cutting rates at this meeting, of which he suggested he was in support.
He explained that Jerome Powell and the FOMC committee will likely keep interest rates unchanged in order to assess Donald Trump’s fiscal policy before they make their next move. He also alluded to the fact there are still a lot of uncertainties in Washington, considering the change in government.
The Donald Trump Factor
While the Fed looks likely to keep interest rates unchanged, it is worth mentioning that Donald Trump has called on the Central Bank to lower rates.
This came while the US president spoke at the Davos conference, where he also promised to make the US the crypto capital. Although the Powell and his team have no obligation to the President, Trump’s call to lower interest rates could still play out in their back of their minds.
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