Crypto Holders brace yourself for the FED, Read this before FED Meeting.

 

Today at 18:00 GMT, the US Federal Reserve will announce the new interest rate. 

Markets expect the Fed to raise interest rates by 25 basis points, from 5.25% to 5.50%, as a continuation of the monetary tightening policy it has been following for a while to curb inflation. Markets will witness a state of high volatility at the time of the announcement of the new interest rate, especially if the Federal Reserve decides to violate market expectations and raise the interest rate by more than 25 basis points, 

This might cause a significant decline in gold and currencies against the US dollar. Financial instruments that will be most likely affected by the rate decision:

-USD pairs

- Gold

-U.S Stocks and indices

- Crypto currencies

The Federal Reserve is poised to implement another interest rate hike today, signaling their unwavering commitment to tackling inflationary concerns. This forthcoming measure will mark the 11th rate increase since early 2022, with interest rates expected to reach a range of 5.25% to 5.50%. Savvy investors are eagerly awaiting this decision, and they will be closely attuned to Chair Jerome Powell's press conference, hoping to glean insights into the central bank's future rate trajectory.

 This does NOT necessarily mean mortgage rates will move higher. For anyone wondering why, please read below for a detailed explanation and reach out with questions!

The Federal Funds Rate and mortgage rates have historically shown a strong correlation, though they are not directly tied together. The historical correlation between the two is based on the fact that the Federal Reserve uses the Federal Funds Rate as a tool to influence the overall economy. When the economy is growing too quickly and there are concerns about inflation, the Federal Reserve may increase the Federal Funds Rate to cool down economic activity. Conversely, during periods of economic slowdown or recession, the Federal Reserve may lower the Federal Funds Rate to stimulate borrowing and economic growth.

Here's how the correlation typically works: Rate Cuts: When the Federal Reserve cuts the Federal Funds Rate, it becomes cheaper for banks to borrow money. As a result, banks can offer lower interest rates to consumers on various loans, including mortgages. Lower mortgage rates encourage more people to buy homes or refinance existing mortgages, boosting housing market activity.

Rate Hikes: When the Federal Reserve raises the Federal Funds Rate, borrowing becomes more expensive for banks, leading to higher costs for consumers on loans, including mortgages. Higher mortgage rates can dampen demand for homes, potentially slowing down the real estate market.

However, it's important to note that mortgage rates are influenced by a variety of other factors as well, including the yield on the 10-year Treasury note, housing market conditions, inflation expectations, and overall economic trends.

While the Federal Funds Rate has historically influenced mortgage rates, it's nota one-to-one relationship, and there can be periods where the correlation weakens due to other market forces at play. Long story short, today's mortgage rate movement will depend almost entirely on the remarks Powell gives with little to no attention paid to the inevitable 1/4 point hike.