Crypto Market on Edge as Fed Decision & PPI Data Loom

Key Insights:

• Today, Bitcoin and the crypto market registered sideways action.
• Such a market move could be attributed to key economic events this week, including the Fed rate decision and the U.S. PPI data.
• The Federal Reserve is expected to keep rates unchanged, which could negatively affect risk assets like crypto.

Bitcoin (BTC) and the overall crypto market are facing the heat. Market participants await a potentially monumental macroeconomic two-fold trigger: the Federal Reserve rate decision and U.S. PPI data.

Crypto Market Braces For Impact Amid Major Economic Events

The week is full of key economic events. Analysts believe the results can help determine the short-term direction of the crypto market. On X, Crypto analyst Ted Pillows declared, “Big Week Ahead For Crypto Holders.”

He added, “The most important event will be FOMC on 18th March, as the market is currently expecting a surge in inflation over the next few months. It’ll be interesting how Powell reacts to this, as the Fed already thinks inflation is a bit elevated.”

Adding to expectations, crypto commentator Martin Folb remarked, “IMO: the FOMC in 1 day will pause rates where they are, even though the dual mandate of the Fed supports rate cuts.” He suggested a potential leadership shift in May. Kevin Warsh, replacing Jerome Powell, could pave the way for Fed rate cuts.

Apart from the Federal Open Market Committee (FOMC) decision, the crypto market is also focusing on the U.S. PPI data due tomorrow. It’s estimated that the Feb PPI could come in at 0.3% month-over-month, down from 0.5% in January. The Core PPI MoM is forecast to come in at 0.5%, down from 0.8% the previous month.

On an annual basis, the Core PPI forecast stands at 3.7%, slightly up from 3.6% reported previously. The data could have serious consequences on the crypto market. An unexpectedly high PPI would most likely strengthen inflation fears. It would push Treasury yields higher and further delay the Fed’s policy easing.

It may strain Bitcoin and the rest of the crypto market. That’s because any tightening of financial conditions is likely to slow the flow of liquidity into speculative assets. Conversely, a lighter or in-line print would offer relief, as traders consider risk assets as they tie hopes to future Fed rate cuts.

What are the Odds of a Fed Rate Cut?

Currently, the market is pricing in a pause in Fed rate hikes. According to the CME FedWatch tool, there is a high chance of the Federal Reserve remaining in the interest rate range of 3.5-3.75% with a 99.1% probability.

Although the pause is widely anticipated, the manner in which the central bank provides guidance is critical. The hawkish pause, where policymakers indicate increasingly higher rates may restrict the crypto market’s upside.

Fed rate cut odds | Source: CME FedWatch tool

Amid geopolitical tensions over the Iran-Israel-US war, experts expect a delay in the Fed’s rate cuts. Nomura’s Senior U.S. economist, Jeremy Schwartz, said, “The conflict with Iran is boosting global energy prices… potentially also some pass-through into some core inflation components.

He added that the labor market “doesn’t seem to be deteriorating” and suggested the Fed is not under pressure to act quickly, according to Reuters. Thus, most economists are eyeing a Fed rate cut in June.

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