- The Fed’s October 28 rate decision could influence Bitcoin’s short-term direction.
- US PCE inflation and Q3 GDP data arrive on October 29, just 18.5 hours later.
- Hot inflation could pressure Bitcoin, while cooler prices may support hopes for rate cuts.
Bitcoin is expected to have two major US economic updates to watch this week. While the Federal Reserve will announce its interest rate decision on October 28, inflation and GDP data are expected the next day. As these reports will also give hints on the Fed’s next move, they have the potential to decide the direction of the crypto market. Depending on these events, Bitcoin could extend its current gains or reverse its initial reaction.
What Markets Expect from the Fed’s Interest Rate Decision
Bitcoin is now looking for what the Federal Reserve will announce about its monetary policy on October 28. They are waiting to see whether the bank will cut interest rates, keep them unchanged, or signal a cautious approach.
According to the CME FedWatch tool, the central bank is likely to hold interest rates unchanged this time. Odds of the Fed keeping the rate stable at 3.75%-4.00% remain high at 90.6%. There is also a 9.4% chance of a possible rate hike to 4.00%-4.25%.
Why October 29’s Inflation and GDP Data Matter for Bitcoin
One of the most important events that the crypto market looks at this week is the Federal Reserve’s interest rate decision on October 28. But this event alone cannot decide the Bitcoin price’s potential movement. This is because fresh US economic data arrives the next day.
The US Bureau of Economic Analysis (BEA) is expected to release September inflation data on October 29. On the day, both the Personal Consumption Expenditures (PCE) price index and the advance estimate of third-quarter GDP.
Significantly, these reports could influence how traders view the central bank’s next move. This means that the inflation report could have a significant impact on the Fed’s monetary policy in the upcoming months. If inflation remains high and economic growth stays strong, investors may expect the rate to remain high for longer. This could put pressure on Bitcoin and other cryptocurrencies.
How Different Inflation and GDP Scenarios Could Affect Bitcoin
The effect of the reports on BTC is likely to hinge on the level of inflation and economic growth in relation to expectations in the market, as this would affect investors’ expectations on interest rates, determining whether BTC would continue with its rally post-Fed meeting.
In case economic growth holds steady and core PCE inflation beats expectations, then there would be little room for the Fed to reduce interest rates, pushing up yields and exerting downward pressure on BTC. On the other hand, an improved economic growth backdrop combined with cool inflation would be a very favorable combination, reflecting a resilient US economy under low price pressure.
However, a different situation could come if growth weakens while inflation remains high. The Federal Reserve would find it challenging to choose between supporting economic growth and keeping inflation under control. This uncertainty could trigger volatility across crypto markets.
Meanwhile, weaker growth combined with cooler inflation could strengthen expectations of monetary easing. Even amid fears of a broader economic slowdown, Bitcoin could benefit from lower yields.
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Significantly, Bitcoin traders should look beyond the Fed’s interest rate decision. They should watch how the market reacts when the inflation and GDP figures arrive. As the gap between the two events is around 18.5 hours, it gives investors some time to reassess their positions.
In addition, Treasury yields will be another important indicator to check. If yields rise after the Fed decision and continue rising following hotter inflation data, it could signal that investors expect interest rates to remain higher. This may add more pressure on crypto.
Related: Federal Reserve Meeting Wednesday Puts Markets on Alert: What To Expect
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
