With the latest Consumer Price Index data for June already released, all economic eyes are now on the US Federal Reserve and the next FOMC meeting scheduled for the end of July.
Even though inflation has calmed, some continue to push for an interest rate hike at the next meeting. The question is: what could happen $BTC and its price stagnation if that is the case?
A big macro test coming up?
Odds have declined over the past week after June inflation data showed a significant decline to 3.5%. While this may be more misleading than it seems, given that oil prices rose in July due to the collapse of the ceasefire, CME FedWatch data shows that experts estimate there is an 85% chance that policymakers will keep rates unchanged. On the other hand, the probability of an increase of 25 basis points stands at a more modest 15%.
These odds changed after Tuesday’s CPI announcement, given the weaker-than-expected reading, reinforcing the market’s expectation that the Fed will not change its current strategy. Nonetheless, some continue to appear increasingly hawkish, including new Fed Chairman Kevin Warsh and Dallas Fed President Lorie Logan.
Rising interest rates seen as an obstacle to growth $BTC and other risky assets, as investors tend to become more defensive. Higher borrowing costs increase the attractiveness of low-risk investments such as Treasury securities, while reducing liquidity in financial markets.
The last major example of Bitcoin plumbing following the Fed’s aggressive tightening cycle was in 2022/2023. However, the current market differs from previous cycles.
Will $BTC Really a crash?
Much of the market reaction would likely depend on whether a rate hike would completely catch investors off guard. Markets overwhelmingly expect rates to remain unchanged; An unexpected rise of 25 or, more ominously, 50 basis points could trigger a sharp sell-off in stocks, cryptocurrencies and other risk assets.
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However, the longer-term picture offers a different perspective. If the central bank raises rates because the local economy remains resilient and inflation proves harder to beat, stronger economic activity could continue to support corporate profits and institutional investor appetite. $BTC It has been proven in the past that it can recover quickly from macroeconomic shocks, particularly when long-term demand remains intact.
For the moment, the landscape seems quite fragile, even if the markets do not anticipate any rate change. However, inflation remains above the Fed’s target, and several policymakers have doubled down on more hawkish attitudes, which could lead to wild price moves if the central bank surprises investors with a rate hike in July.
