Global markets are feeling the pressure of fear and uncertainty, as the upcoming Federal Open Market Committee (FOMC) plans to take a decision on Wednesday on changing the current monetary easing policy and raising the benchmark interest rate. Economists and market analysts fear the Fed Reserve will tighten markets too quickly after the central bank expands the US monetary supply as previously in history.
Allianz chief economic adviser: ‘Fed kept its transient inflation narrative for too long’
All eyes are on the Federal Reserve this week The conversation has turned into speculation About the upcoming FOMC meeting. The committee will make a decision on Wednesday at 2 p.m. (EST) followed by a press conference by central bank chairman Jerome Powell. Global stocks jumped and fell significantly last week, while crypto markets followed the same path the crypto economy shed billions in value. Precious metals like gold and silver managed to prevent market losses, and both the metals are up a few percent in the last 30 days.
As the US central bank signals a tightening of quantitative easing (QE) and raising interest rates, critics of the Fed believe the pivot is too sharp. Mohamed El-Erian, chief economic advisor at financial services company Allianz, is one of those critics. “The first policy mistake was completely misunderstanding inflation,” El-Erian said on Tuesday. He added that the Fed’s board of governors “maintained its momentary inflation narrative for 2021 too long, missing window after window to slowly wean its foot off the stimulus accelerator.”
FOMC tomorrow is probably the range from today till then
— TraderSZ (@trader1sz) 25 January 2022
Now that the Fed is increasingly moving towards tightening monetary easing, traders and analysts fear a fresh new market position. “I will be enough” [reluctant] “Anything to consider adding to or adding to until we hear from the fast-moving Fed on Wednesday,” Mark Lopresti, managing director of Strategic Funds, told the press on Monday.
Market participants try to predict Fed’s monetary tightening timeline
Meanwhile, as the FOMC meeting is trending on social media and forums, say analysts trying to predict premature decision.
The Fed just released some of its 2023 FOMC dates. So, I was able to expand this table.
here is the latest pic.twitter.com/6qwXj1AEVm
— Jim Bianco biancoresearch.eth (@biancoresearch) 24 January 2022
Prediction markets powered by kalshi.com are also trying to predict when the US central bank will raise the benchmark rate. 98% of those taking advantage of Kalshi.com’s Fed Prediction Markets say the Fed will raise the rate above 0.25% in July.
The least chosen month was December 2022 and 84% chose that specific date. Financial Analyst on Twitter as “Known by the Name”Mach 10Explained that the market bulls need to break their strength.
“The way I see it either way the market crashes between now and the FOMC, forcing the Fed to reverse,” Mach 10 wrote, “Or, the Fed gets hawkish and the market crashes. I don’t see the Goldilocks scenario. Bulls, something must break for the Fed to reverse. That something is you.”
UBS executive: ‘This week’s Fed meeting likely to outline Fed’s change in policy priorities’
Mark Heffele, CIO of Global Wealth Management at UBS, thinks the upcoming Fed meeting will “underscore” the Fed’s current thinking.
“Over the past decade, market volatility was tempered by the assumption that the Federal Reserve and other global central banks would take steps to support the economy in the event of weakness, exogenous shocks, or unexpected tightening in global financial conditions. “Today, with inflation still elevated, that support seems less certain,” Haefel said in a statement on Tuesday, and this week’s Fed meeting is expected to support a change in the Fed’s policy priorities and It is likely to underline the shift towards fighting inflation.”
If the Fed doesn’t reverse course during Wednesday’s FOMC meeting, I think everything will fall farther than I expected.
Once they are essentially reversed, #bitcoin Jumps fast in a big way.
— Joe Burnett (🔑)³ (@IIICapital) 24 January 2022
Metrics recorded 24 hours before the FOMC meeting showed that the stock markets saw some respite at the end of the day on Monday. Tech stocks, Nasdaq, NYSE and Dow Jones ended the day green and cryptocurrency markets saw a similar pattern. As of Tuesday morning, the crypto economy has surged 8.5% to $1.7 trillion over the past 24 hours, with major crypto assets such as Bitcoin (BTC) and Ethereum (ETH) jumping 7-10% in value over the past day.
What do you think about the upcoming FOMC meeting and the possibility of the Fed tightening monetary easing too sharply? Let us know what you think about this topic in the comment section below.
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