The Fed's September interest rates will be announced "at this time"
Tonight, investors are focusing on the Federal Reserve's (FED) September interest rate decision, which will be announced at 2:00 a.m. on September 19, Taiwan time. According to the latest data from the CME Group's (CME) FedWatch tool, investors believe that The possibility that the American League will cut interest rates by 2% at this meeting has increased significantly compared with a week ago.
Prior to this, most investors expected the FED to cut interest rates by only 1 percentage point in September, but the latest data from CME shows that the probability of a 2-cent rate cut has now risen to about 65%; the probability of a 1-cent rate cut has dropped to 35%; previously The few voices that believed the Fed would not cut interest rates in September have disappeared.
Image source: CME Fedwatch CME Group FedWatch Tool: September Rate Cut Forecast
Why is the probability of a 2-digit rate cut increasing?
Nick Timiraos, a well-known journalist known as the Fed's "mouthpiece", pointed out that in the past, when the Federal Reserve (FED) started a rate cut cycle, it usually started by cutting interest rates by one yard. However, due to the recent sharp slowdown in employment, if the FED is more inclined If you are worried about the economic outlook, you may cut interest rates by 2%. Otherwise, considering that inflation may show signs of rebound, the FED may still adopt a conservative attitude and cut interest rates by 1%.
Under this uncertainty, the FED has the opportunity to wait for two years and once again make decisions that are not unanimously approved.
K33 Research warned in a report that the FED's interest rate cuts are not necessarily good for risk assets, because they may imply that the economy is in recession. K33 Research pointed out that during the economic recessions in 2001 and 2007, the FED made similar large-scale cuts. Cut interest rates.
However, other experts refute that the situation this time is different from that then. As inflation cools and the unemployment rate rises, the FED has chosen to cut interest rates quickly at this point in time, which can effectively respond to the current economic situation. It is expected that the FED will cut a total of 10% of interest rates by the end of 2024. Maybe drop 5 yards to deal with the current predicament.
Bitcoin volatility warning
With the probability of a 2-digit interest rate cut rising sharply, Bitcoin ($BTC) rose nearly 5% this morning, once hitting a 3-week high of $61,000, and then gave up part of the gains. As of writing, it was $60,328, holding on to $60,000. Key points for the U.S. dollar.
Image Source: Coingecko Bitcoin Price: 9/18
Joel Kruger, a market strategist at LMAX Group, said that the market trends in the next few days will revolve around the FED’s decision. Generally speaking, if the Federal Reserve (FED) decides to cut interest rates, whether it is 1 or 2, it will be a big risk for stocks such as U.S. stocks and Bitcoin. ($BTC) This is good news for such risky assets.
However, Joel Kruger also reminded investors to pay attention to another thing after the Federal Reserve (FED) interest rate decision-making meeting - Chairman Jerome Powell's post-meeting press conference. Powell's speech at the press conference will be very important. It will largely determine the direction of the Fed's policy in the next three months. If Ball and the FED choose to be hawkish after this rate cut, the good news may still turn into bad news.
