BlackRock Expects Fed to Maintain Interest Rates, Potentially Boosting Bitcoin Price in the Short-Term

BlackRock Predicts Flat Fed Interest Rate, Potentially Boosting Bitcoin Price                                         

BlackRock, the global asset management company, is anticipating that the Federal Reserve will maintain its policy interest rate unchanged at the upcoming Federal Open Markets Committee (FOMC) meeting on Wednesday. This projection aligns with market expectations and could potentially lead to a significant short-term price increase for Bitcoin (BTC).

BlackRock’s Fed Forecast

Marilyn Watson, BlackRock’s Head of Global Fundamental Income Strategy, predicts that the central bank’s federal funds target rate will remain relatively stable for the rest of the year, including the September, November, and December meetings. However, Watson also foresees the Fed’s target rate to remain elevated until mid-2024, followed by a series of modest cuts that would bring it down by 1% from its current level by the end of next year.

“In terms of inflation, it has been moderating, it has been coming down, but it’s still above the target,” Watson said in an interview with Bloomberg. “I think really what we need to see is a deterioration in economic activity…and at the moment we just haven’t seen that in terms of the data.”

Since March 2022, the Fed has been gradually raising rates to combat high inflation levels in the United States. This approach has affected both stock and cryptocurrency prices. Although it was expected that this hawkish rate-hiking strategy would negatively impact the global economy, its consequences have mostly been contained, aside from a brief series of bank failures in March 2023.

“For the moment, I think the economic data has consistently exceeded expectations,” stated Watson, referring to indicators such as GDP, the unemployment rate, and the labor market.

Jeremy Siegel, a finance professor at Wharton, shares the view that the Fed will not raise rates during Wednesday’s meeting, breaking away from his previous stance. He believes it would not be in the best interest of the average worker to risk a recession for the sake of tackling inflation.

“The political calculus is the Fed should not raise again,” Siegel explained in an interview with CNBC. “If you ask the average worker, ‘do you want to squeeze a point or two of super core inflation or a million to two million more unemployed?’ they’d say they don’t want a recession.”

Siegel also predicts that equities will remain strong for the rest of 2023 due to the robust economic data. Bitcoin has historically shown a correlation with equities, especially in the context of central bank activities.

Be Prepared for a Possible Recession

While the economy appears to be performing well currently, prominent crypto market analyst TXMC on Twitter warns investors to be cautious of a recession that may start next year.

“I think the market may begin to sense the end of the tightening cycle and could rally on that sentiment,” said the analyst in a message to Crypto News Desk. “However, recession risks remain high in the first half of next year.”

The analyst has previously argued that Bitcoin’s price is primarily influenced by macroeconomic conditions, including its four-year cycles, which they believe are not related to the “halving” event. They also emphasized that during recessions, risk assets tend to decline, suggesting that Bitcoin may not perform well in such an environment.

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