Key Factors to Watch in the Upcoming Fed Meeting
The Federal Reserve is set to hold its first meeting of 2025 on Wednesday, with an interest rate decision expected to be announced at 19:00 UTC. This will be followed by a press conference featuring Chairman Jerome Powell at 19:30 UTC.
The Fed is currently maintaining an interest rate target range of 4.25% to 4.5%, reflecting a decrease of 100 basis points from September. Previous discussions suggested a cautious approach to rate cuts, influencing the behavior of various assets, including bitcoin (BTC).
What to anticipate:
- Rate Decision: It is widely assumed that the meeting will not lead to any changes in rates.
- Market Sensitivity: Comments from Powell regarding sensitive topics like deportations, shelter inflation, and the debt ceiling may sway market reactions significantly.
Focus Areas for Discussion
Deportation of Illegal Immigrants
President Donald Trump is progressing on campaign promises to deport illegal immigrants, with estimates suggesting deportations could reach up to 10 million. Analysts predict that significant deportations could strain labor markets and drive inflation expectations higher, influencing Powell’s comments during the meeting.
U.S. Debt Ceiling
The U.S. recently hit its imposed debt ceiling of $36 trillion, prompting the Treasury to initiate extraordinary measures to maintain government functionality. The resulting liquidity in the markets may play a crucial role in forthcoming discussions as Powell aims to balance these factors while addressing market expectations.
Rent Inflation
Recent indicators suggest a moderation in shelter inflation, which heavily impacts the consumer price index. If Powell acknowledges these trends, it could potentially advance market conditions favorably.
Key Quotes
“We doubt this week’s FOMC meeting will be a major market mover as the unchanged rate decision has been well communicated.”
— Danske Bank, in a note to clients.
“The disappearance of up to 1 million potential workers from the U.S. labor force would be no small thing.”
— Benjamin Picton, Senior Macro Strategist, Rabobank.
