BlackRock Predicts No Change in Fed Interest Rate
Asset management giant BlackRock expects the Federal Reserve to maintain its policy interest rate at the upcoming Federal Open Markets Committee (FOMC) meeting. This prediction aligns with market expectations and could potentially result in a short-term price boost for Bitcoin (BTC).
BlackRock’s Fed Forecast
Marilyn Watson, BlackRock’s head of Global Fundamental Income Strategy, anticipates that the central bank’s federal funds target rate will remain relatively unchanged until the end of the year, including the September, November, and December meetings. However, Watson also predicts that the Fed’s target rate will remain elevated until mid-2024 before gradually decreasing by 1% by the end of next year.
“In terms of inflation, it has been moderating, it has been coming down, but it’s still above the target,” Watson explained. “I think really what we need to see is a deterioration in economic activity… and at the moment we just haven’t seen that in terms of the data.”
Since March 2022, the Federal Reserve has been steadily increasing rates to combat high inflation in the United States. This has had an impact on stock and crypto prices. However, the consequences have been relatively contained apart from a few bank failures earlier this year.
Wharton finance professor Jeremy Siegel agrees with BlackRock’s prediction and believes that the Fed won’t raise rates at this time. He argues that considering the strong performance of the economy, raising rates could lead to higher unemployment rates and potentially a recession.
“The political calculus is the Fed should not raise again,” Siegel stated. “If you ask the average worker, ‘do you want to squeeze a point or two of super core inflation or a million to two million more unemployed?’ they’d say they don’t want a recession.”
Despite the positive economic outlook, popular crypto market analyst TXMC on Twitter warns investors to be cautious of a possible recession next year. He believes that Bitcoin’s price is primarily influenced by macroeconomic conditions and that the asset may not perform well in a recessionary environment.
Hot Take: Fed Expected to Keep Rates Steady, Providing Short-Term Boost for Bitcoin
BlackRock’s prediction that the Federal Reserve will maintain its policy interest rate at the upcoming FOMC meeting aligns with market expectations. This forecast could potentially result in a short-term price boost for Bitcoin. While some analysts anticipate that the Fed will raise rates, BlackRock and other experts argue that considering the strong economic performance, it would be more beneficial to avoid further rate hikes. However, investors should remain cautious as there are warnings of a possible recession next year that could negatively impact Bitcoin’s performance. Overall, the decision by the Federal Reserve will have significant implications for both traditional and digital asset markets.
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