TLDR
Fed expected to maintain current interest rates (4.25-4.50%) at Wednesday’s meeting while keeping December’s hawkish guidance
Trump’s mass deportation policy could impact labor markets and inflation, potentially affecting Fed’s rate cut decisions
U.S. hit $36 trillion debt ceiling, leading Treasury to implement extraordinary measures including TGA spending
Bitcoin trading around $102,000, with analysts expecting price movements based on Powell’s tone during FOMC meeting
Recent shelter inflation data shows moderation, which could influence Fed’s future policy decisions
The Federal Reserve (Fed) is preparing for its first meeting of 2025, scheduled for Wednesday, with markets closely watching for signals about future monetary policy. The meeting comes as bitcoin trades near $102,000 and as new immigration policies begin to take effect across the United States.
The Federal Open Market Committee (FOMC) is widely expected to keep interest rates steady at their current range of 4.25% to 4.50%. This decision follows a 25-basis point rate cut in December, which marked a 100-basis point decline since September 2024.
Market participants have largely priced in an unchanged rate decision, with CME’s FedWatch tool indicating a 99.5% probability of rates remaining stable. The focus has instead shifted to Fed Chairman Jerome Powell’s press conference, scheduled for 19:30 UTC on Wednesday.
The meeting takes place against the backdrop of President Donald Trump’s new immigration policies, which began implementation over the weekend. Early estimates suggest that deportations could affect between one million to ten million individuals currently residing in the United States.
I could see one more stab down before FOMC tbh.$BTC pic.twitter.com/QupM77uJet
— Byzantine General (@ByzGeneral) January 28, 2025
Labor market implications of these deportation policies have caught the attention of economic analysts. Rabobank’s Senior Macro Strategist Benjamin Picton notes that removing up to one million workers from the labor force could tighten an already strong job market, potentially creating upward pressure on wages and inflation.
The Treasury Department recently announced that the U.S. had reached its $36 trillion debt ceiling, prompting the implementation of extraordinary measures. One key action involves drawing down the Treasury General Account (TGA), which typically helps ease market liquidity conditions.
Bitcoin’s price action has remained relatively stable in anticipation of the Fed meeting, consolidating above $100,000 after briefly dipping below this psychological barrier. The cryptocurrency closed at $102,000 on January 28, with traders watching for potential volatility following Powell’s comments.
Recent data indicates a moderation in shelter inflation, a key component of the Consumer Price Index. The Labor Department’s “all tenant rent” index showed a slowdown to 3.2% growth in the fourth quarter, compared to 3.9% in the previous quarter and 5.5% a year ago.
Technical analysts have identified several key price levels for Bitcoin around the FOMC meeting. Support levels appear around $97,000 and $94,000, with some analysts suggesting these areas could be tested before the meeting. Resistance levels are noted near $107,000, with a potential push toward new all-time highs above $110,000 if market sentiment turns positive.
Market commentators note that Trump’s public calls for interest rate cuts add another layer of complexity to the meeting. However, they emphasize that the Federal Reserve maintains its independence in policy decisions.
Danske Bank analysts expect limited market impact from this week’s meeting, citing clear advance communication from December. They note that while preliminary assumptions about Trump’s policies have been considered, uncertainty remains high.
The TGA spending situation presents an additional factor for consideration. This spending typically creates easier liquidity conditions, which could offset some effects of the Fed’s ongoing quantitative tightening measures.
Leading indicators for shelter inflation suggest a potential easing trend, which Powell may address during his press conference. Wall Street Journal’s Chief Economic Correspondent Nick Timaros highlighted that current levels are approaching the 2017-2019 average of 3.1%.
Byzantine General, a futures market analyst, suggests Bitcoin prices might test lower levels in the $92,000-$94,000 range before the FOMC meeting concludes. However, other analysts point to potentially bullish scenarios if Powell’s tone appears less hawkish than in December.
The market remains particularly focused on any shifts in forward guidance, especially given recent economic data points and the new political landscape under the Trump administration.
