The Federal Reserve is expected to announce a 25-basis-point rate cut, bringing interest rates to the 4.5%-4.7% range. While this move is widely expected, it might not cause much of a stir on its own. The real attention will come when Fed Chair Jerome Powell discusses how President-elect Trump’s economic policies could affect inflation and the Fed’s future actions.
Trump’s tax cuts, increased spending, and proposed tariffs on countries like China and Mexico could drive up inflation, complicating the Fed’s plans to ease rates.
The world is watching. Here’s what you can expect ahead.
Powell’s remarks on the potential inflationary effects of Trump’s policies will be closely watched. If Powell suggests that these policies could lead to higher inflation, the Fed may have to reconsider its rate cuts, which could unsettle both traditional markets and the crypto space. Bitcoin, which recently surged to $75,000, has been on a strong rally, partly due to hopes that a Trump administration will bring more crypto-friendly regulations.
But if inflation concerns rise, it could dampen Bitcoin’s momentum and create more uncertainty for investors.
The Fed’s 50-basis-point rate cut in September aimed to support growth, especially as inflation showed signs of cooling. With the current rate at 4.75%-5%, which is above the neutral level, the Fed has room to ease further, and more cuts are expected through 2025.
However, Trump’s planned fiscal expansion could make the Fed rethink its approach. Bank of America’s research suggests that if tariffs and increased fiscal spending push inflation higher, the Fed might pause its cuts or even reverse course, keeping rates higher for longer.
While Thursday’s meeting may not change rates immediately, traders are focused on Powell’s comments about Trump’s economic plans. If Powell downplays inflation risks, Bitcoin could continue its upward trend. But if he signals that the Fed might need to keep rates high due to Trump’s policies, it could cause turbulence in the markets, including cryptocurrencies like Bitcoin, which thrive in a low-rate environment.
Having misjudged inflation in 2021, the Fed is now more cautious. Powell’s response to Trump’s economic plans could be a game-changer. If the Fed signals a slower pace of rate cuts or higher rates in the long term, markets will have to adjust expectations.
Bitcoin’s rally could face challenges, and broader financial markets may experience volatility as the Fed carefully navigates between supporting growth and managing inflation risks linked to Trump’s fiscal agenda.
The Fed is scheduled to announce its decision at 2:00 PM ET on November 7, with a press conference featuring Fed Chair Jerome Powell at 2:30 PM ET.
The FOMC Meeting lasts two days i.e on 6th and 7th of November and concludes with the FOMC releasing its policy decision at 2 pm Eastern time.
The Fed’s decision and Powell’s commentary will set the tone for the markets in the coming months. Stay tuned to know more.
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