Central banks are in doubt. Several banks have already failed and interest rates have not been this high for more than a decade, but inflation is still high. Tomorrow the US central bank will make an important decision. The influence on bitcoin (BTC) could be bigger than you might think.
The Federal Reserve will decide on interest rates tomorrow
Tomorrow at 19:00 Dutch time, the Federal Reserve will decide how high the interest rates for the coming pera have to lie down. Half an hour later it stops press conference where Federal Reserve Director Jerome Powell will reveal what the expectations for the economy are.
The Fed still has the policy rate at the moment stand at 4.75%, the highest since November of 2007. But the economy is already showing signs of slowing here and there, and inflation has already fallen significantly. The US annual official inflation rate peaked at 9.1% in July last year, but this one is already at 6.0%.
Also, interest rates are now so high that it has damaged banks’ bond portfolios enormously. This seems to have been a major reason for the bankruptcy of Silicon Valley Bank, Signature Bank, Crédit Suisse and several other banks. According to researchers, there are still almost 190 American banks that are also in very bad shape.
Influence Fed positive for Bitcoin?
We can assume that the Fed is closely monitoring the banking crisis and will also take it into account in tomorrow’s decision. Many analysts expect an interest rate hike from another 0.25% to a rate of 5%. That could mean that this has already been factored into asset prices by investors.
An interest rate increase of a quarter of a percent is relatively low compared to previous increases. Steps of 0.5% and 0.75% were taken several times last year, and a 1% increase was not even ruled out.
If the central bank decides not to raise interest rates, that could be positive for many assets including for bitcoin and other cryptocurrencies. An increase may not even be necessary for rising crypto prices. Any pause could also encourage investors to take more risk.