Fed Rate Decision: What Markets and Bitcoin Traders Can Expect
In brief
- The Fed announces its decision at 2 p.m. ET with Chair Kevin Warsh's press conference to follow, and futures and prediction markets put the odds of a hold above 90%.
- The target range sits at 3.75%-4.00% after September's 12-0 hike, with September inflation at 3.7% and oil near $100 a barrel.
- Markets give 75% to 80% odds to another quarter-point hike on Dec. 8-9, while bitcoin trades around $80,700.
The Federal Reserve announces its interest rate decision at 2 p.m. ET today, and traders are almost certain it will change nothing.
CME FedWatch, a tool that converts bets on interest rate futures into probabilities, puts the odds of a hold above 90%, while prediction markets price it a few points higher.
The decision reaches well beyond Wall Street, because the federal funds rate, which is what banks charge each other for overnight loans, sets the baseline for what consumers pay on credit cards and loans. That rate sits at 3.75% to 4.00% after the Fed raised it in September, its first hike since 2023, in a unanimous 12-0 vote.
Consumer prices rose 3.7% in the 12 months through September, the Labor Department reported, and gasoline alone jumped 9.1% in the month. Hiring is slowing, though: employers added just 29,000 jobs in September against forecasts of about 90,000, and the unemployment rate stood at 4.2%.
Oil is a major driver of that inflation, trading near $100 a barrel because the U.S.-Iran war has squeezed global supply. Pricier crude lifts gasoline and shipping costs, which eventually show up on grocery shelves and push inflation higher.
Higher inflation makes investors demand more interest for lending to the government, which lifts Treasury yields, the interest rate on U.S. government debt. The 10-year yield, the benchmark that mortgage rates follow, is hovering around 5% after peaking at 5.31% on Oct. 5, so a nearly risk-free return is available without owning anything volatile.
→Bitcoin pays no yield and is also very volatile for traditional investors, so when Treasuries pay more, money tends to drift out of riskier assets such as crypto and stocks. The price of Bitcoin sits around $80,700, just below a support-now-resistance zone where sellers have repeatedly stopped rallies this year.
Leverage, meaning borrowed money used to make bigger bets, tends to exaggerate the moves around Fed events. When prices swing against a trader, the exchange automatically closes the position, a liquidation that adds to the selling pressure. After Fed Chair Kevin Warsh’s Jackson Hole speech in August, about $481 million in crypto positions were liquidated within 24 hours, more than $360 million of them bets on higher prices.
Traders now appear focused on December, where futures and prediction markets give 75% to 80% odds on another quarter-point hike at the Dec. 8-9 meeting. Minutes from September’s meeting show most officials judged another increase would likely be appropriate by year-end, and several said the current rate was “not restrictive or only mildly restrictive.”
Analysts are calling the likely outcome a “hawkish hold,” meaning rates stay put while the tone leaves more hikes on the table. Asked in September whether more hikes would follow, Warsh said, “I’m not going to prejudge any future decisions we make.” He also told reporters, “This won’t surprise you: I’m not in the forward guidance business,” which is Fed-speak for declining to signal future moves.
Dissents, meaning votes against the majority, are the clearest tell in the statement. The Fed’s July vote was 9-3, with three members favoring a hike, so a dissent for tightening today would suggest December is close to locked in.
The Fed publishes no new economic projections at this meeting. Those will arrive in December.
Daily Debrief Newsletter
Start every day with the top news stories right now, plus original features, a podcast, videos and more.
Join 72,000+ readers