BlackRock Predicts Flat Interest Rate at Next Federal Reserve Meeting
Asset management giant BlackRock expects the Federal Reserve to keep its policy interest rate flat at its next Federal Open Markets Committee (FOMC) meeting on Wednesday. This prediction aligns with market expectations and is anticipated to have a positive impact on Bitcoin (BTC) prices in the short term.
BlackRock’s Fed Forecast
Marilyn Watson, BlackRock’s head of Global Fundamental Income Strategy, predicts that the central bank’s federal funds target rate will remain unchanged until the end of the year, including the upcoming September, November, and December meetings. However, Watson also believes that the Fed’s target rate will remain elevated until mid-2024, with a series of modest cuts gradually bringing it down by 1% from its current level by the end of next year.
“In terms of inflation, it has been moderating, it has been coming down, but it’s still above the target,” Watson said in an interview with Bloomberg. “I think really what we need to see is a deterioration in economic activity… and at the moment we just haven’t seen that in terms of the data.”
Since March 2022, the Fed has been increasing interest rates to combat high inflation in the United States. However, this has had negative effects on both stock and crypto prices. Despite concerns about the potential impact on the global economy, the consequences have been relatively contained, with only a short period of bank failures beginning in March 2023.
“For the moment, I think the economic data has consistently surprised to the upside,” Watson added, referring to positive indicators such as GDP, the unemployment rate, and the labor market.
No Rate Hike Expected
Wharton finance professor Jeremy Siegel also believes that the Fed will not raise rates at the upcoming FOMC meeting. Siegel’s position has shifted from his previous stance, where he called for rate hikes. He now argues that raising rates could lead to a recession, a scenario that most workers would prefer to avoid.
“The political calculus is the Fed should not raise again,” Siegel said in an interview with CNBC. “If you ask the average worker, ‘do you want to squeeze a point or two of super core inflation or a million to two million more unemployed?’ they’d say they don’t want a recession.”
Siegel believes that equities may remain strong for the remainder of 2023 due to positive economic data. This is significant for Bitcoin, as it has historically shown correlation with equities, especially in relation to central bank activity.
Caution for a Coming Recession
While the current economy appears robust, popular crypto market analyst TXMC on Twitter warns investors to be cautious of a potential recession starting next year.
“I think the market may begin to sniff an end to the tightening cycle and could lift on that sentiment,” the analyst told CryptoPotato in a direct message. “Recession risks remain elevated into the first half of next year, however.”
The analyst believes that Bitcoin’s price is primarily influenced by macroeconomic conditions, including its 4-year cycles, rather than the Bitcoin “halving” events. They suggest that BTC may not perform well during a recession, as risk assets tend to decline in such environments. Additionally, Bitcoin has not yet experienced a true recession since its inception.
Do make sure to check out the article from Bloomberg [here](https://www.youtube.com/watch?v=o2CDMgIziZo&ab_channel=BloombergTelevision) for more insights on BlackRock’s expectations for the Federal Reserve’s interest rates.
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