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Tonight, global financial markets are focused on one key event: the U.S. Federal Reserve’s interest rate decision. Investors are anxiously awaiting the Fed’s move, as it could have significant implications for the economy and for markets like crypto. This article explains what to expect, why this decision matters, and the potential impact on crypto.
What to Expect Tonight #
Tonight at 8 PM Dutch time, the U.S. Federal Reserve (the Fed) will announce its decision on interest rates. In other words, it will determine whether rates go up or down and by how much.
This is an important decision, but it may not be very dramatic. According to data from CME Group, there is an 87% chance that the Fed will cut rates tonight. On the well-known prediction platform Polymarket, people are even more confident: 96% of voters expect a 25-basis-point (0.25%) rate cut.
In short, the market expects a rate cut, and most likely a 0.25% cut rather than a 0.50% cut.
So far this year, the Fed has cut rates twice by 0.25% on October 29 and September 17. A 0.50% cut is much rarer. The last time that happened was on September 18, 2024.
In addition to the rate decision, investors are also closely watching Fed Chair Jerome Powell’s speech, which will follow shortly after the announcement. They hope to find clues about how the Fed views the economic situation and the likely direction of the next rate decision.
Why This Matters for the Crypto Market #
A rate cut is important for the crypto market because borrowing becomes cheaper and saving becomes less attractive. Banks lend more easily, and investors keep less money in savings accounts due to low returns. As a result, more money flows into investments like stocks and cryptocurrencies. Additionally, lower rates often weaken the value of traditional money, leading some to see crypto as an alternative to protect their purchasing power. All of this can drive up demand for crypto and have a positive impact on prices.
Conversely, a rate hike would have the opposite effect: it is often bad for the crypto market because saving becomes more attractive and borrowing becomes more expensive.
However, the chance of a rate hike is expected to be very small. Investors are mainly looking forward to Powell’s speech for hints about future rate developments.