On Monday (September 19), the Bitcoin ($BTC) price fell below the $18,400 level, which is the lowest it has been since June 19, as global markets nervously wait for the conclusion of this month’s meeting of the Federal Open Market Committee (FOMC).
According to data by TradingView, on crypto exchange Bitstamp, at 6:44 a.m. UTC on September 19, the Bitcoin price fell to $18,332, which is today’s intraday low. Currently (i.e. as of 1:55 p.m. UTC on September 19), BTC-USD is trading around $19,142, down 3.99% in the past 24-hour period.
After the two-day FOMC meeting ends on Wednesday (September 21), Federal Reserve Chair Jerome Powell will announce how much the FOMC has decided to raise the federal funds rate, which the Federal Reserve Bank of St. Louis defines as “the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. “
Here is some more information from St. Louis Fed about the federal funds rate:
“The Federal Open Market Committee (FOMC) meets eight times a year to determine the federal funds target rate. As previously stated, this rate influences the effective federal funds rate through open market operations or by buying and selling of government bonds (government debt). More specifically, the Federal Reserve decreases liquidity by selling government bonds, thereby raising the federal funds rate because banks have less liquidity to trade with other banks. Similarly, the Federal Reserve can increase liquidity by buying government bonds, decreasing the federal funds rate because banks have excess liquidity for trade.
“Whether the Federal Reserve wants to buy or sell bonds depends on the state of the economy. If the FOMC believes the economy is growing too fast and inflation pressures are inconsistent with the dual mandate of the Federal Reserve, the Committee may set a higher federal funds rate target to temper economic activity. In the opposing scenario, the FOMC may set a lower federal funds rate target to spur greater economic activity.
“Therefore, the FOMC must observe the current state of the economy to determine the best course of monetary policy that will maximize economic growth while adhering to the dual mandate set forth by Congress. In making its monetary policy decisions, the FOMC considers a wealth of economic data, such as: trends in prices and wages, employment, consumer spending and income, business investments, and foreign exchange markets.
“The federal funds rate is the central interest rate in the U.S. financial market. It influences other interest rates such as the prime rate, which is the rate banks charge their customers with higher credit ratings. Additionally, the federal funds rate indirectly influences longer- term interest rates such as mortgages, loans, and savings, all of which are very important to consumer wealth and confidence.“
Although most analysts are expecting a 75 basis points (i.e. 0.75%) rate hike, there are some who believe that there is a 20% chance of a 100 basis points rate increase because inflation in the U.S. went up more than expected in August.
As you may remember, on September 13, the U.S. Bureau of Labor Statistics reported that “the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in August on a seasonally adjusted basis after being unchanged in July,” and that “over the last 12 months, the all items index increased 8.3 percent before seasonal adjustment.”
Here are a few comments from some of the most popular crypto analysts on Twitter:
Of course, the U.S. stock market also is nervous about what Fed Chair Powell will say on Wednesday, as you can see from how the major U.S. stock indices are currently doing:
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