Wall Street Estimates On US Federal Reserve Rate Hike Decision

The U.S. Federal Reserve will announce another crucial rate hike decision during the FOMC meeting on Wednesday, February 1, primarily based on the aim to reduce inflation to 2%. Considering the cooling inflation and strong jobs data, Wall Street experts believe the Fed is likely to slow the interest rate hike to 25 bps.

Futures-tied U.S. stock indexes Dow Jones, S&P 500, and Nasdaq 100 are down 0.50% ahead of the U.S. Fed rate hike decision.

Wall Street Expectations On US Fed Rate Hike

The U.S. Fed raised interest rate by 425 bps last year, with four consecutive 75 bps rate hikes and a 50 bps rate hike in December. Wall Street expects a further slowdown in rate hikes due to rising recession risk and debt.

JPMorgan estimates a 25 bps rate hike by U.S. Federal Reserve in the FOMC meeting. JPMorgan CEO Jamie Dimon earlier said the Fed may have to increase interest rates beyond 5%.

All top banks including Barclays, Credit Suisse, Citi, Goldman Sachs, HSBC, Nomura, and Wells Fargo expect a 25 bps rate hike by the U.S. Federal Reserve. The expectations are mostly based on cooling inflation, strong jobs data, and an increase in the U.S. GDP growth rate at 2.9% in the fourth quarter.

However, experts believe the Fed is unlikely to pivot now as inflation is still above target. Christopher J. Waller, a member of the Federal Reserve Board of Governors, asserts the Fed needs six months of data, not three months of positive data to consider a pivot. Thus, the Fed is likely to pause the rate hike before their May 2-3 meeting.

According to CME FedWatch Tool, there’s a 99.3% probability of a 25 bps rate hike by the U.S. Fed rate hike.

How It Will Impact Crypto Market

While the Fed is likely to raise the interest rate by 25 bps, a 50 bps rate hike is also on the table. If the Fed goes with a 25 bps rate hike and hints at a dovish stance, then Bitcoin price is likely to rally above $25,000. However, if Fed Chair Jerome Powell hints at hawkish during the press conference, a fight between bulls and bears will continue.

Bitcoin price currently trades near the $23k level, up 1% in the last 24 hours. Meanwhile, Ethereum price is moving sideways, with the current price trading at $1,575. The crypto market will remain volatile during this week.

Also Read: Budget 2023 India: Are Income Tax Changes Good For the Crypto Community in India?