Lasting two days and starting on January 28, the FOMC (Federal Open Market Committee) meeting is always a potentially volatile time for the crypto world. This holds true even more so for this particular one since it will be the first meeting since Donald Trump’s return to the presidency.
Regarding the meeting, while fixed income markets foresee potential interest rate cuts in 2025, the anticipated reduction is expected to be limited. Also, the U.S. Federal Reserve policymakers are likely to hold interest rates steady.
However, considering Trump’s policies include raising import taxes and advocating for interest rate cuts by the Federal Reserve, it’s hard to predict what exactly will happen.
One thing is for sure, though – all of this is going to impact the crypto world, in one way or another.
How Interest Rates Could Impact Crypto
If interest rates are cut, investors could have more liquidity to deploy elsewhere, leading to an increase in the price of Bitcoin and other currencies. Since limited cuts are generally expected, it could also mean less liquidity, which could result in market stagnation and possibly even a wider sell-off.
We’re already seeing some prices drop, including Bitcoin. The upcoming FOMC meeting arguably has at least something to do with it due to the anticipation of what will happen during the upcoming two days.
In addition, the Federal Reserve is known for sharing statements after FOMC, which could also shake up the market. Though with Trump in office, it’s safe to assume the outlook will be positive.
What is FOMC?
The Federal Open Market Committee is the policymaking arm of the Federal Reserve System (the central bank of the United States) that determines the direction of monetary policy by directing open market operations. These operations involve the buying and selling of U.S. Treasury securities, which in turn influence interest rates and the money supply in the economy.
The usual meeting consists of the committee reviewing the current state of the U.S. economy, including inflation, unemployment, GDP growth, and other key indicators. It also considers global economic developments that could impact the U.S. economy.
Based on its assessment, the FOMC decides on the appropriate stance of monetary policy. This typically involves setting a target range for the federal funds rate, which is the interest rate banks charge each other for overnight loans.
After the meeting, the FOMC releases a statement summarizing their economic outlook, policy decisions, and any risks to the economic outlook. The most important part to remember is that FOMC’s decisions have a significant impact on the U.S. economy and financial markets. As such, these meetings are closely watched by investors and market participants – crypto enthusiasts included.
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