Fed Rate Decision January 28: Bitcoin Markets Brace for Powell Comments

TLDR

• Federal Reserve meets January 28 with 99% market probability of holding rates at 3.5%-3.75% range
• Jerome Powell’s press conference will reveal if rate pause is temporary or extended, impacting bitcoin direction
• Trump’s $200 billion mortgage bond purchase and housing policies may trigger inflation concerns
• Stephen Miran expected to dissent for larger rate cut, potentially signaling dovish shift
• Dollar-yen intervention reports create additional uncertainty for bitcoin due to currency correlations

The Federal Reserve announces its latest interest rate decision Wednesday. Markets show near certainty the central bank will maintain rates at 3.5%-3.75%. After three straight quarter-point cuts, policymakers are set to pause.

CME FedWatch futures indicated 96% odds for unchanged rates as of Friday. Polymarket data pushed the probability higher to 99.3%. Any rate movement carries less than 1% likelihood, according to market pricing.

The Fed cut rates three times in recent meetings. The reductions brought the target range down from previous levels. Inflation data and employment conditions changed little since December, limiting the case for more cuts.

Powell’s Tone Matters More Than Decision

Chairman Jerome Powell’s post-meeting press conference carries more weight than the rate announcement. His comments on future policy will shape bitcoin and stock movements. Traders need clarity on whether this pause is brief or prolonged.

Morgan Stanley predicts a dovish signal from the Fed. The firm expects policy statement language about “considering the range and timing for further adjustments” to remain. This wording keeps future cuts possible.

A hawkish Powell would emphasize inflation risks. This approach would damage rate-cut hopes and pressure risk assets lower. A dovish stance suggests cuts resume soon, potentially lifting bitcoin prices.

Stephen Miran, Trump’s Fed appointee, is expected to dissent. He supports a 50-basis-point reduction. Additional dissenters would strengthen expectations for future easing. This scenario favors bitcoin and equities.

Most analysts forecast one or two rate cuts through 2026. JPMorgan breaks from consensus, projecting zero cuts this year and a hike in 2027.

Trump Policies Create New Variables

Powell faces questions about President Trump’s housing affordability measures. Trump announced plans to purchase $200 billion in mortgage-backed securities. The administration claims this will reduce borrowing costs for homebuyers.

An executive order also targets institutional investors buying single-family homes. The order restricts large firms from competing with individual buyers. These policies could accelerate housing demand and push prices higher.

Allianz Investment Management warned the mortgage purchases risk front-loading demand. This could inflate home values and primarily benefit existing owners. The institutional investor ban may have limited effect given low ownership percentages.

ING analysts said Powell’s rationale for holding rates could strengthen the dollar. A rising greenback typically weighs on bitcoin and other dollar-denominated assets. Powell may find it difficult to argue conditions are restrictive given strong asset markets.

Trump’s tariffs already factor into market expectations. Higher import costs are expected to reach consumers this year. Powell may address these inflationary pressures during his remarks.

Reports suggest possible coordinated dollar-yen intervention between the Fed and Bank of Japan. The New York Fed conducted rate checks, a preparatory step for such action. This would involve selling dollars to buy yen.

Bitcoin has shown sensitivity to currency movements historically. The cryptocurrency typically moves opposite the dollar and tracks the yen. A Bank of Japan rate hike in August 2024 strengthened the yen and caused bitcoin to fall sharply. Japan’s yen weakness and high bond yields create pressure for intervention.

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