FOMC May 2023: How Will Crypto Markets React?

Paigambar Mohan Raj
Source: Bankrate

Both traditional and crypto investors are focused on the next FOMC (Federal Open Market Committee ) meeting. The Fed‘s next meeting is set to take place on May 2-3 (Tuesday-Wednesday). Although inflation in the United States is slowing down, investors still expect another 25 basis point interest rate hike.

According to a report by Goldman Sachs, the FOMC is likely to announce a widely anticipated 25bps rate increase to 5.00–5.25%. However, analysts at the financial giant believe that this month’s meeting will focus on “revisions to the forward guidance.” Furthermore, Goldman Sachs believed that there will be signals of interest rates pausing in June. This is due to the likelihood that bank stress will result in credit tightening.

CNBC and Reuters analysts also share a similar view that hikes could see a pause after May. According to a Reuters poll, the Fed will increase interest rates by 25 basis points in May, and then hold steady for the rest of 2023. Moreover, a rate drop appears less plausible than higher rates. This is because inflation in the U.S. is still more than double the Fed’s 2% target.

A modest improvement from the 65% last month, the poll revealed a median 70% risk of a U.S. recession in the next two years. The banking crisis and inflation could cause the U.S. economy to enter a recession far sooner than expected.

How will the FOMC meeting affect the crypto markets?

According to some community members, a 25 basis point increase from the FOMC meeting might not have much impact on the crypto markets. Crypto researcher Neel Kukreti, “There shouldn’t be any significant drop in the price of Bitcoin.” Kukreti is behind the YouTube channel Crypto Jargon. Kukreti further stated that even a 50bps increase would not cause Bitcoin to break $29k levels.

Prior to the Federal Reserve’s decision on interest rates, traders are speculating about a possible comedown.

Nonetheless, some volatility can be expected as FOMC announcements usually tend to do so. Bitcoin (BTC) is currently facing support at $27,844, with resistance at $28,384. At press time, BTC was trading at $28,028, down by 1.9% in the last 24 hours.

Source: BTC/USDT Chart by Trading View