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The Federal Reserve will announce its interest rate decision at 2 p.m. Eastern Time, followed by a press conference held by Federal Reserve Chairman Kevin Warsh ( Kevin Warsh ). Both the futures market and the forecasting market indicate that the probability of interest rates remaining unchanged exceeds 90%.
After the Federal Reserve unanimously approved a rate hike in September with 12 votes in favor, the current target interest rate range is 3.75% to 4.00%. In September, the inflation rate was 3.7%, while oil prices approached $100 per barrel.
The market assigns a 75% to 80% probability of another 25-basis-point interest rate hike at the meeting on December 8th to 9th. Meanwhile, the trading price of Bitcoin is around $80,700.
The Federal Reserve will announce its interest rate decision at 2 p.m. Eastern Time today, and traders are almost certain that there will be no change.
CME FedWatch is a tool that converts bets on interest rate futures into probabilities, indicating that the probability of maintaining a constant interest rate exceeds 90%; the probability predicted by the market is slightly higher.
The impact of this decision extends far beyond Wall Street, as the federal funds rate – which is the interest rate at which banks lend to each other overnight – becomes the benchmark for the cost of consumer credit cards and loans. In September, the Federal Reserve voted unanimously with 12 votes in favor of raising interest rates for the first time since 2023, raising the target range to 3.75% to 4.00%.
The U.S. Department of Labor reported that consumer prices rose 3.7% year-on-year in September, with gasoline prices increasing by 9.1% in that month alone. However, employment growth is slowing down: only 29,000 new jobs were created in September, far below the expected 90,000, and the unemployment rate is 4.2%.
Oil prices are one of the important drivers of inflation. Due to the US-Iran war squeezing global supply, oil prices have been hovering around $100 per barrel. Rising crude oil prices will push up the costs of gasoline and transportation, which will ultimately be reflected in the prices of food and groceries, further fueling inflation.
Higher inflation will prompt investors to demand higher interest rates in order to lend to the government, thereby pushing up the yields on U.S. Treasury bonds. The yield on 10-year U.S. Treasuries serves as a benchmark for mortgage loan rates and is currently hovering around 5%. On October 5th, it reached a high of 5.31%, so investors can obtain nearly risk-free returns without holding any volatile assets.
Bitcoin does not pay dividends, and it also has high volatility for traditional investors. Therefore, when U.S. Treasury yields rise, funds tend to flow out of risky assets such as cryptocurrencies and stocks. The current price of Bitcoin is around $80,700, which is slightly below a support-resistance zone that has repeatedly prevented rebounds this year.
Leverage – which involves borrowing funds to increase bets – often magnifies fluctuations before and after Federal Reserve events. When price trends are unfavorable for traders, exchanges will automatically close positions, and such forced liquidations can further exacerbate selling pressure. After Federal Reserve Chairman Kevin Warsh delivered a speech at Jackson Hole in August, approximately $481 million in crypto positions were liquidated within 24 hours, of which over $360 million were positions betting on price increases.
Traders currently seem to be more focused on December. The futures and forecasting markets estimate that there is a 75% to 80% probability of another 25-basis-point interest rate hike at the meeting on December 8th to 9th. The minutes from the September meeting indicated that most officials believed it would be appropriate to raise rates again by the end of the year, and several officials stated that current interest rates are "not restrictive, or only slightly restrictive."
Analysts referred to the possible outcome as a "hawkish standstill," meaning that interest rates will remain unchanged, but the wording implies that further rate hikes could still occur. When asked in September whether there would be further rate hikes, Walsh stated, "I would not predict any decisions we may make in the future." He also told reporters, "This should not come as a surprise to you: I do not provide forward-looking guidance." In the context of the Federal Reserve, this means that no hints about future actions will be given.
In a declaration, a vote against the majority opinion – that is, a vote in opposition – is the clearest signal. The Federal Reserve's voting results in July were 9 in favor and 3 against, with 3 members supporting an interest rate hike. Therefore, if there are votes against tightening policies today, it would mean that an interest rate hike in December is almost a foregone conclusion.
No new economic forecasts will be released at this meeting; the relevant information will be announced in December.
