Will the Federal Reserve Implement Further Tightening Policies?

The crypto community is anticipating a volatile week ahead considering two catalytic events, the US CPI Report and the FOMC meeting. While the US Consumer Price Inflation report for November will be issued on Tuesday, the rate is expected to impact the Federal Reserve’s decision on interest rates.

Investors have been speculating about a relaxation in the Fed’s interest rate following Fed Chair Jerome Powell’s hints on interest rate cuts depending on the inflation rate. Previously, in a speech, Powell asserted that the interest rates would be reduced if the inflation rate descends “solidly back” to 2%. Adding that the Fed is “prepared to tighten policy further if it becomes appropriate to do so,” Powell cited,

“Inflation is still running well above target, but it’s moving in the right direction. So we think the right thing to be doing now is to be moving carefully, thinking carefully about how things are going on, letting the data tell us what the story is. The data will tell us whether we’ve done enough or whether we need to do more.”

Predictions suggest that the consumer price of November is most likely to exhibit a marginal increase of 0.1% from the previous month’s data. However, the anticipated annual inflation rate is approximately 3.1%, marking a minor decrease from October’s report that projected a rate of 3.2%.

Taking Powell’s words into consideration, there would be a relaxation in the interest rate if the inflation rate is at 3% or below. In contrast, if the inflation rate exhibits an unexpected hike, the Fed would be forced to implement measures, including a notable increase in interest hikes to tackle the growing inflation.

The FOMC meeting scheduled for December 12-13 is speculated to reflect the outcome of the CPI report. According to forecasts, the upcoming meeting would possibly reveal an unchanged interest rate held at 5.25-5.50%. Though there were talks about the further tightening of the Fed’s policy, the current data forecasts the end of rate hikes.