FOMC Keeps Rates On Hold

The chances of interest rates rising once more increase significantly into next year.

The move was widely expected and did not rattle markets.

As was widely expected, the Fed has chosen to keep interest rates at 525-550 bps in its November 1 meeting.

CME Group's FedWatch Tool, which surveys interest rate traders to forecast the likelihood that the Fed will change the Federal target rate at upcoming FOMC meetings, put the odds of a hold at 99.7% shortly before the meeting, with an increase to 550-575 at 0.3%.

Screenshot of CME FedWatch Tool.
An interest rate hold was all but a dead cert this month.

With traders overwhelmingly expecting the hold, and the Fed not giving any surprises, the markets were calm. Earlier in the day, bitcoin poked its nose above $35,000 and almost took out the local high at $35,200, but then made a full retrace back to its starting point at the key resistance level of $34,500, flat on the day.

BTC-USD 4h chart, TradingView
Bitcoin was unaffected by the FOMC decision

Maybe Higher, And Definitely Longer

For the coming months, there's much more uncertainty. Traders are divided on whether further rate hikes are on the cards. CME is currently forecasting a 26% chance of a quarter-point increase in December, with a small chance (0.7%) of a half-point rise to 575-600.

Looking further out to January, there's a 37% chance of a rise. The first hope of a decrease in rates doesn't materialize until March, and is currently set at 7.5% for a fall to 500-525.

Overall, the Fed is making good on its promise that interest rates would remain "higher for longer" to tackle inflation. For many months, traders did not believe Powell, expecting that rates would already be falling. They have been confounded, and risk assets like stocks and crypto have come under renewed pressure as a result—though the last two weeks of action for BTC have shown that other factors can outweigh even the Fed's influence.

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