While Bitcoin (BTC) seeks to recover from his recent slowdown, observers turn to the decision of the Federal Reserve (Fed) on Wednesday to offer support, some saying that an announcement to end the balance sheet program, known as the quantitative tightening, could be a new positive for the market.
The Fed will announce its rate review at 6:00 p.m. UTC, followed by President Jerome Powell’s press conference half an hour later.
It is unlikely that the bank will make surprises on the interest rate front, retaining the current range of 4.25% to 4.50%. Consequently, the emphasis will be placed on the way in which political decision -makers plan to continue the quantitative tightening program, given the concerns that it could affect liquidity in the system while the treasure struggling with the question of the ceiling of the debt in progress. In addition, the summary of economic projections will be monitored by the markets.
Since June 2022, the FED, as part of the QT program, has slowly decreased its balance sheet, which had zoomed towards a file of $ 9 billions after the CIRECIER when the bank bought billions of dollars in assets, including obligations, to support the markets.
The report of the January Fed meeting has shown that political decision-makers have discussed the break or slowdown in the inversion of the expansion of the balance sheet which grew the Haussier Crypto market of 2020-21. Thus, the possibility of referring to Powell the same later in the day cannot be excluded.
“At the end of last year, the president of the Fed Powell suggested that the end of QT arrived in 2025. If he mentions it in tomorrow [Wednesday’s] Press declaration or conference (I imagine someone I will ask him), it would eventually point out that we are in a new monetary regime, and that the Fed is ready to resume additional debts should become necessary for QE, “said Noelle Acheson, author of the crypto is Macro Now Newsletter in Tuesday edition.
“Although the renewed QE [quantitive easing] Unlikely soon, the additional liquidity of a big buyer (the Fed) returns to the market to replace the maturation assets would be good news, “added Acheson, noting that the end of the QT would be a timely decision to avoid liquidity problems on the treasury market which faces $ 9 billion in debt maturity this year.
New York Life Investments economist Lauren Goodwin expressed a similar opinion, saying that a slightly prior end of the balance sheet could provide the market with a dominant signal that he was looking for.
Traders on the decentralized Paris Polymarket Paris platform see 100% chance that the Fed will end the QT program before May. The bets on the same thing will be resolved in “yes” if the central bank increases the amount of the titles it holds in place per week by the end of April.
Bank of America predicts the end of QT
Several investment banks, including Bank of America, expect the Fed to end QT during a meeting characterized by uncertain economic prospects mainly from the trade rates of President Donald Trump.
“Our pricing strategists expect the declaration indicating that the Fed stops in QT until the debt ceiling is resolved, as suggested in the minutes of the January meeting. They do not expect to restart after the debt ceiling is processed, but the announcement will not be made until later,” said the client of March 14.
A QT break could drop out of the yield on the score of the US Treasury at 10 years old, the rate called risk -free, galvanizing the demand for risky assets.
Watch out for stagflation indices
Trump’s prices have increased the risks of inflation while posing risks to economic growth, a stagflationist situation and the Fed Summary of Economic Projections (MS) could reflect this. A wink to stagflation could mean a delay in additional rate reductions, which potentially limits Bitcoin gains from a QT pause ad.
According to Acheson, the chances of a stagflationary adjustment in the SEP – Lower GDP projections and higher basic PCE estimates, with more political decision -makers citing the rising risks of inflation – are high.
“If, in fact, we get this stagflationist change in official projections, the market is unlikely to be happy. To a certain extent, they are starting to be assessed – but the confirmation that the Fed is likely to push further rate drops may surprise those that count on liquidity injections,” said Acheson.
The American and recently published US and regional retail indices revealed signs of economic weakness, on the other hand, the prospective inflation metrics have increased, probably adapting to Trump prices.
Bank of America said it better: “The combination of the signal of the latest data and policies adopted to date should lead to the growth of Fed growth and the upgrading of inflation this year, a little wink to stagflation.”
“The dot plot should always display two ’25 and ’26 cuts,” added the investment bank.
