45% Chance of September Interest Rate Hike...Will Crypto Collapse Amid Tightening Fears?

▲ Bitcoin (BTC), US Dollar (USD)/AI-generated image

With the likelihood of a September interest rate hike by the US Federal Reserve soaring to 45.4%, the cryptocurrency market is once again gripped by tightening fears ahead of the release of the July Federal Open Market Committee (FOMC) minutes.

According to CoinGape, a cryptocurrency specialized media outlet, on July 5 (local time), the Fed has kept its benchmark interest rate frozen for four consecutive times this year but has not eased its inflation concerns. Kevin Warsh, former Federal Reserve Governor, expressed at a European Central Bank forum in Sintra, Portugal, his commitment to prioritizing price stability, despite calls from politicians to lower borrowing costs. The market interpreted Warsh's remarks as a signal that monetary policy would be determined independently of political pressure.

While investors recently breathed a sigh of relief as US employment figures fell below Wall Street's expectations, concerns about interest rate hikes have actually grown. Ludovic Subran, an Allianz analyst, suggested in an interview with Bloomberg TV that inflation could peak above 3.7%, citing increased demand for artificial intelligence (AI) and an energy-centric economy. Subran also predicted the possibility of the Fed raising interest rates in September.

On the CME FedWatch Tool, the probability of the Fed raising the benchmark interest rate by 0.25 percentage points rose to 45.4%. The prospect that inflationary pressures could persist despite slowing employment has put a brake on expectations for monetary policy easing, causing cryptocurrency investors to hesitate in aggressively expanding their positions.

Rising interest rates can put pressure on funds flowing into risk-sensitive assets like cryptocurrencies. Analysis suggests that if the FOMC minutes, to be released on July 8, reaffirm the Fed's cautious monetary policy stance, market expectations for short-term policy easing could recede. CoinGape pointed out the possibility that a high-interest-rate environment could limit the anticipated upward trend in the cryptocurrency market.

The market's focus is on the inflation assessment and future policy direction contained in the FOMC minutes. It is diagnosed that if the Fed's tightening resolve is confirmed, investment sentiment for risk assets could be pressured, and investors are continuing to move cautiously until clear signals on monetary policy emerge.

[Key Article Summary]

-The probability of the Fed raising interest rates by 0.25 percentage points rose to 45.4% according to the CME FedWatch Tool.

-Ludovic Subran predicted that inflation would peak above 3.7% and that the Fed would likely raise interest rates in September.

-The cryptocurrency market is closely watching whether the Fed's hawkish stance will be confirmed in the July 8 FOMC minutes.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*