As financial markets prepare for the upcoming Federal Open Market Committee (FOMC) meeting on Wednesday, June 12, the Bitcoin and cryptocurrency community is ready to assess the implications of any Federal Reserve announcements for digital assets such as Bitcoin. With the consensus forecast suggesting that the Federal Reserve will hold the federal funds rate steady at 5.25%-5.50%, investors’ primary interest has turned to the nuances of the Fed’s future economic guidance and projections.

Crypto analyst Tomo (@Market_Look) shared his observations at X, considering the upcoming FOMC meeting to be a non-existent event for those who expect drastic moves. He stated: “Interest rates are likely to remain unchanged (5.25%-5.50%). There will likely be no major changes to this statement or the economic outlook, and the scatter plot will likely move in a hawkish direction.”

Tomo also highlighted expected adjustments in interest rate projections for the coming years, noting: “In 2024, the rate will move from 3 to 2 cuts. The hawkish surprise will be 1 cut.” He explained that the market has already priced in these expected corrections, suggesting minimal surprise and constrained market volatility in response.

“As of March, the dot distribution for 2024 is 9 in favor of leaving interest rates unchanged or cutting them twice, and 10 in favor of cutting interest rates three or more times… the shift from three to two is already accounted for.”

A team of economists from banking giant ING, including James Knightley and Padhraic Garvey, CFA, participation a similarly conservative view of potential moves by the Federal Reserve. They expect the Fed to emphasize its cautious stance due to persistent inflation and forceful employment data, potentially delaying rate cuts well into the future.

The ING team detailed its expectations: “The US Fed acknowledges that monetary policy is tight, but persistent inflation and strong job growth mean it is prepared to wait longer before seriously considering interest rate cuts.”

They predict that the scatter plot that will reveal individual FOMC members’ interest rate projections will show a reduction in the number of projected rate cuts for 2024 from three to possibly one or two.

According to Nick Timiraos of the Wall Street Journal, JPMorgan and Citigroup withdrew their forecasts for an interest rate cut in July in the wake of the latest jobs report last Friday. Currently, most sales economists and other experts monitoring the Federal Reserve predict one or two rate cuts in September or December this year.

JPM and Citi withdrew their calls for a July rate cut following Friday’s jobs report.

Most sell-side economists and other professional Fed observers now expect one or two rate cuts this year in September or December pic.twitter.com/x9tUD06Pmi

— Nick Timiraos (@NickTimiraos) June 10, 2024

Impact on Bitcoin and cryptocurrencies

Bitcoin and the broader cryptocurrency market have been quite sensitive to macroeconomic data lately. Waiting for a dovish turn – especially any signs of interest rate cuts – could weaken the dollar and strengthen Bitcoin and other digital assets as alternative investments.

Conversely, confirmation of the current rate or a less dovish stance than expected could strengthen the dollar and put downward pressure on cryptocurrency markets. However, the varying perspectives of FOMC members, as reflected in the scatter chart and accompanying economic projections, could provide clues to the medium-term trajectory of U.S. monetary policy, which in turn could influence investor sentiment in cryptocurrency markets.

A hawkish tilt, suggesting fewer or delayed interest rate cuts, could strengthen the U.S. dollar and put pressure on Bitcoin and other cryptocurrencies. Conversely, any dovish signals or signs of a softer stance on interest rate increases in the near future could revive the cryptocurrency market.

During the FOMC press conference, Chairman Jerome Powell’s remarks will be crucial in setting the tone and expectations. Market participants will be closely monitoring his comments for any change in tone regarding inflation, economic growth and future monetary policy adjustments. Interpreting these comments may lead to significant price movements in the Bitcoin and cryptocurrency markets.

Moreover, data on the US Consumer Price Index (CPI) for May 2024, a few hours before the FOMC meeting, will be critical. This data will provide significant context for the Fed’s decisions, influencing its assessment of whether current policy stances remain appropriate.

At press time, BTC was trading at $67,707, down 3.5% from yesterday’s high of $71,200.

Featured image from Shutterstock, chart from TradingView.com