Federal Reserve Rate Decision This Week: What It Means for Bitcoin
TLDR
- Federal Reserve expected to keep interest rates unchanged at 3.5%-3.75% on Wednesday, January 28, with 96-99% market probability
- Chairman Jerome Powell’s press conference comments on future rate cuts will determine if the pause is dovish or hawkish for bitcoin and stocks
- Trump appointee Stephen Miran expected to dissent in favor of 50-basis-point cut, which could signal future easing
- Powell faces questions about Trump’s $200 billion mortgage bond purchase plan and its inflationary impact on housing
- Reports suggest Fed may coordinate dollar-yen intervention, which historically correlates with bitcoin price movements
The Federal Reserve will announce its rate decision on Wednesday, January 28. Markets expect no change to current rates. After three consecutive quarter-point cuts, the central bank is set to pause at 3.5%-3.75%.
CME FedWatch futures showed a 96% probability of rates holding steady as of Friday. Polymarket data placed the odds even higher at 99.3%. No rate change carries under 1% odds, according to trader predictions.
Powell’s Comments Will Move Markets
Chairman Jerome Powell’s post-meeting press conference holds more weight than the decision itself. His stance on future rate cuts will determine market direction. Traders want to know if the pause is temporary or signals a longer hold.
A hawkish pause would mean Powell highlights inflation risks. This scenario would hurt rate-cut expectations and pressure bitcoin lower. A dovish pause suggests cuts resume in coming months, which could lift bitcoin and stocks.
Trump appointee Stephen Miran is expected to dissent. He favors a 50-basis-point cut. More dissenters would strengthen the case for future easing and boost risk assets.
Most observers expect one or two rate cuts over the rest of 2026. JPMorgan stands alone in forecasting no cuts this year, followed by a hike in 2027. The Fed delivered three quarter-point cuts in recent meetings, bringing rates down from higher levels.
Minneapolis Fed President Neel Kashkari told The New York Times it is “way too soon” to cut rates again. He holds a vote on the Federal Open Market Committee this year. His comments support the hold decision.
Trump Housing Measures Add Complexity
Powell will likely face questions about Trump’s housing affordability policies. The president announced plans to buy $200 billion in mortgage bonds. He claims this will lower rates and monthly payments.
Trump also issued an executive order targeting large institutional investors. The order restricts them from buying single-family homes. Observers say these measures could increase housing demand and inflation.
Allianz Investment Management warned the mortgage bond purchases risk pulling forward demand. This could inflate prices and benefit current homeowners more than buyers. The institutional investor ban may have limited impact due to small ownership levels.
ING analysts said Powell’s explanation of holding rates steady could lift the U.S. dollar. A stronger dollar typically weighs on bitcoin and other greenback-dominated assets. Powell may struggle to argue financial conditions are restrictive given recent market performance.
Trump’s tariffs already factor into expectations. Markets anticipate delayed inflationary effects this year as import costs reach consumers. Powell may downplay these concerns during the press conference.
The chairman could also face questions about the Justice Department investigation targeting him. Trump has criticized Powell for not cutting rates faster. Powell called the probe political vengeance.
Reports indicate the Fed may coordinate dollar-yen intervention with Japan. The New York Fed conducted rate checks, a step used before intervention. This would involve selling dollars and buying yen.
Bitcoin shows historical sensitivity to currency moves. The cryptocurrency has an inverse relationship with the U.S. dollar and positive correlation with the yen. A Bank of Japan rate hike in August 2024 strengthened the yen and caused bitcoin to drop sharply.
Japan faces yen weakness and high bond yields. Previous solo interventions failed in 2022 and 2024. Coordinated actions with the U.S. proved more effective in the past. Currency intervention combined with Fed policy creates uncertainty for bitcoin traders.
The post Federal Reserve Rate Decision This Week: What It Means for Bitcoin appeared first on CoinCentral.
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