Markets
Bitcoin (BTC) Price Reflects Upcoming Central Bank Policy Decisions
Three major central banks are holding monetary policy meetings this week, and the outcomes from each are expected to be at least somewhat different.
The first decision is due on Wednesday (Tuesday evening in the US) from the Bank of Japan, and analysts are divided on whether the BOJ will raise its benchmark rate from the current 0%-0.1% or send a signal that a rate hike is imminent. What is known is that inflation in Japan has been above the bank’s 2% target for some time, and the yen, though recovering lately, continues to hover near multi-decade lows against the US dollar.
THE The WSJ also reported that the BOJ believes that tighter monetary policy could boost sluggish consumption in Japan, as higher rates would further boost the yen and ease the prices of key imports such as gasoline and food.
Next up is the Federal Reserve’s decision on Wednesday afternoon (US time). While virtually no one sees the Fed cutting the federal funds rate for the first time since 2020, nearly everyone expects the U.S. central bank to signal its expectation to cut rates at its next meeting in mid-September.
In fact, the current odds of a September rate cut are 100%, According to CME FedWatchwith a 12% chance that the Fed will cut by 50 basis points instead of the usual 25.
The Bank of England’s policy decision will be announced early on Thursday afternoon in the UK and both economists and interest rate markets will be They are split about 50/50 whether that central bank eases policy for the first time in several years. What is more certain is that even if the BOE cuts rates, it is likely to signal a very cautious approach, meaning that it signals to markets that a round of easing should not be expected just yet.
Unless there are surprises, such as the Fed indicating that a September rate cut is not yet a given, bitcoin (BTC) Prices may not be affected all that much by this week’s central bank news.
In the longer term, however, it looks like at least modest rate cuts at all major central banks except the BOJ are the new norm. In addition to developments at the Fed and BOE, the European Central Bank cut its benchmark rate earlier this summer, and the Bank of Canada has cut twice in recent months.
All else being equal, looser monetary policy tends to be positive for risk assets like bitcoin. However, markets tend to anticipate, and while bitcoin’s 56% rally year-to-date is commonly attributed primarily to demand for U.S.-based spot ETFs, at least part of that move may have been driven by expectations that Western monetary policy was about to enter an easing cycle after a multi-year tightening trend.