According to Woofun AI, the Federal Reserve will announce its interest rate decision today at 2 p.m. EST, followed by Chairman Kevin Walsh at 2:30 p.m. on the same day. Although the conference lacked a “bitmap” of economic predictions and interest rate predictions that traders usually pay attention to, the resolution itself still contained extremely high uncertainty and became the focus of market attention.
First, the high degree of uncertainty about the outcome has led to institutional divisions. According to Chicago Mercantile Exchange (CME) (CME.US) federal funds futures data, the market currently believes that the probability of interest rate increases is about 35%. Such a high level of uncertainty is rare when a decision is nearing; usually traders should have formed clear expectations. As one of the world's largest hedge funds, Castle Investments predicts that interest rates will rise. The agency believes that this move will make forward-looking guidance no longer a tool of policy choice, and this is a plan that Chairman Walsh has supported for a long time.
Second, worsening macroeconomic indicators have intensified the pressure to tighten policies. The yield on 10-year US Treasury bonds and 2-year US Treasury bonds have both broken through key levels that have defined the short-term retracement trend since 2023. Meanwhile, the price of WTI crude oil rose by nearly 20% this month, and peace negotiations between the US and Iran are at an impasse.
According to Woofun AI, after inflation eased in June due to falling oil prices, the risk of inflation rising again increased significantly, which greatly reduced the space for the Federal Reserve to make dovish remarks.
If the Federal Reserve takes a hawkish stance or raises interest rates, bond yields may further soar, impacting risky assets, including cryptocurrencies; conversely, if it downplays concerns about inflation, the price of BTC may rise sharply. The K-line chart on the left shows US 10-year US Treasury yields, and the chart on the right shows the 2-year US Treasury yield trend. Both have broken through the retracement trend line since October 2023.
This means that the upward trend in interest rates starting in 2021 is likely to accelerate, and the market needs to pay close attention to relevant market developments to obtain the latest information.