Bitcoin’s near-term volatility could be influenced by the monetary-policy decisions of the Federal Reserve and Bank of Japan, with traders focused on the U.S.-Japan rate differential, yen movements and the outlook for carry trades.
The two central banks are set to announce policy decisions within days of each other, beginning with the Fed on Wednesday afternoon. Futures markets were pricing in more than an 80% probability of a 25-basis-point rate increase. The closely spaced meetings have drawn attention to whether monetary-policy expectations in the two economies are starting to converge.
Fed hike expectations have shifted significantly since late August. The probability moved from about 50% to as high as 92%. The change occurred alongside a monthly advance in the yen against the dollar, according to the report, adding to the factors shaping markets before the Fed announcement and the BOJ meeting two days later.
Investors are assessing the combined impact rather than viewing the two decisions separately. If both central banks raise rates, the gap between U.S. and Japanese borrowing costs could narrow for the first time in years. Such a shift could have implications for carry trades and risk appetite as markets move toward the fourth quarter.
The potential policy moves also come against a broader backdrop of tighter monetary policy among major economies. The Federal Reserve, European Central Bank and BOJ could all increase rates during the same period for the first time since 2006, highlighting the possibility of greater alignment in global rate paths.
For Bitcoin and other risk assets, the central concern is how markets interpret the changing policy outlook rather than any predetermined price target. Traders are tracking the rate differential, yen strength and carry-trade positioning around the two decisions.
Fed and BOJ Decisions Could Provide Clues for Bitcoin
The Federal Open Market Committee’s Sept. 15-16 meeting includes an updated Summary of Economic Projections, according to the Fed’s official meeting calendar. The dot plot will be closely examined, while investors will also watch for dissenting votes at the BOJ for indications of where U.S. and Japanese rate policies may be heading.
Expectations for the BOJ have been relatively consistent. A CNBC survey of 18 economists conducted Sept. 9-14 found that 89% anticipated a 25-basis-point increase to 1.25%, described by the report as a new three-decade high. Respondents cited rising inflation, stronger wages and pressure from Washington among the reasons for the expected hike.
Still, economists differ over the pace of future increases. Jesper Koll, expert director at Monex Group, projected a 50-basis-point move, while Carlos Casanova, senior economist for Asia at Union Bancaire Privée, expected the BOJ to hold rates, arguing that current economic data did not justify a faster tightening cycle.
The Fed decision on Wednesday will be the first major market test. Traders will assess the updated dot plot and futures pricing for clues about whether expectations for U.S. rates have changed and whether the interest-rate gap with Japan could shrink.
The BOJ will follow with its decision Friday, with any dissenting votes likely to receive particular attention. Political factors may also influence expectations. Takahide Kiuchi, executive economist at Nomura Research Institute, told CNBC that the Trump administration had effectively limited the ability of a potential Takaichi administration to oppose a BOJ rate increase.
The yen will provide another important market signal. Approximately 61% of economists in the CNBC survey expected the currency to trade between 155 and 160 per dollar over the next month.
The yen’s reaction and any changes in carry-trade activity will help investors gauge how markets are responding to the prospect of tighter policy from both central banks and the potential implications for Bitcoin and other risk-sensitive assets.
