• The Federal Reserve is expected to announce a 25 basis points rate hike tomorrow, with the current market view being a strong likelihood of this happening.
• The banking industry has seen some respite today, with First Republic Bank up 30% and Credit Suisse and UBS both seeing increases in share price.
• Crypto markets could be negatively impacted by the interest rate decision tomorrow, however there is an expectation that when the Fed does eventually pivot to cutting rates, crypto could benefit significantly.
Interest Rate Decision
Tomorrow’s interest rate decision from the Federal Reserve (Fed) could be an important factor in whether Crypto continues its rise of the last few months. According to the CME FedWatch tool, there is a strong likelihood of a 25 basis points rate hike, with 81.9% probability of this happening at present. Some analysts are suggesting that the Fed should not raise rates at all and some even suggest it needs to start cutting straight away in order to take pressure off banks.
Banking Industry Update
The banking industry has seen some respite today, with First Republic Bank up 30%, Credit Suisse halting haemorrhaging and UBS up 8%. Treasury Secretary Janet Yellen is expected to announce today that federal government intervention would occur if any other banks start to fail.
Impact on Crypto Markets
Crypto markets could be negatively impacted by tomorrow’s interest rate decision if it is indeed raised by 25 basis points as anticipated. This will follow 3 major banks ceasing providing fiat on/off ramps which have already had an effect on crypto markets. However, there remains expectations that when the Fed pivots to cutting rates – crypto could benefit significantly from such a move.
Expectations for Interest Rate Cut
Many analysts suggest that the Fed shouldn’t hike rates at all, and some are even of opinion that it needs to start cutting straight away in order to take pressure off banks. There is also anticipation that when the Fed does eventually pivot towards cutting rates – it will need to have built up a decent percentage of around 5% + in order for enough points to cut with – giving further ground for potential gains in cryptos should this come about sooner rather than later.
It remains uncertain how exactly crypto markets will react to tomorrow’s interest rate decision but investors are likely hoping for no change or even better – a surprise cut! Banks have been given some respite today but actually getting back into growth may depend somewhat on what happens tomorrow with regard to interest rates – so watch this space!