In the weeks preceding the announcement of the Fed scheduled for September 17, the expectations of the crypto and the wider financial community had taken care of that the Fed would finally implement rate reductions. Consequently, the probabilities of target rate on the Fedwatch tool had experienced a peak of 97.6% hope of a reduction in the rate. With the decision so close, the expectations of a rate drop remained because investors have not changed their position.
Rail reduction: interest rate that should drop to 4.0% to 4.25%
Hearing the established trend, the market continues to expect the Fed to drop on rates on September 17. After spending weeks in favor of a rate drop, the Fedwatch tool on the CME group’s website shows that market observers now promote that rates would decrease after the last meeting, pushing interest rates to the region from 4.00% to 4.25%.
After increasing more than 97% last week, the probability of a rate drop maintained an average of more than 95%. At the time of writing the editorial staff, the tool now displays a probability of 96.1% of the Fed reduction interest rates. This is still very close to the 97.6% recorded and reported by NewsBTC just over a week ago.
Interestingly, the tool has now started a probability of 3.9% interest rates that reduce even more to 3.75% to 4.00%, a complete reversal that was not observed last week. This shows how the market observers consult the FOMC meeting for the moment, and with the announcement so close, it is likely to go out in favor of this.
In all of this, the only thing that has not changed is the feeling around a possible increase in rates. During this period, there was a probability of 0% that the Fed chooses to increase interest rates at the moment, which would be lower for the markets.
The cryptography market could see volatility
In the event of a rate drop to 4.00% to 4.25%, expectations are that risk assets such as crypto and shares will benefit the most. Indeed, lower interest rates encourage more risk -taking, and often the effect of a drop in interest rates is made just after the announcement.
We expect a drop in interest rates to make the market for arrow cryptography. However, it is prudent to see how the market takes place before jumping, because volatility will be quite high in the early hours of the announcement. It is also possible that the Fed chooses to keep the interest rates identical, which would not be as optimistic for the markets, but would not be exactly lower either. On the other hand, an increase in interest rates would certainly crush the market.
Dall.e star image, tradingView.com graphic
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