Fed Decision and Inflation Report to Trigger Market Volatility

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by Tokoni Uti · 3 min read
Fed Decision and Inflation Report to Trigger Market Volatility
Photo: NYSE / Twitter

This week, the decision from the Fed regarding interest rates and inflation statements for November will be released. These are both expected to trigger market volatility.

As the year wraps up, Bloomberg is predicting that several key events this week will lead to increased stock market volatility. The first of these is the decision by the Fed on interest rates. Ever since the record increases in interest rates back in March 2022, market watchers have been even more on edge regarding announcements from the Fed.

How These Events Move the Market

The last time, the Fed announced that interest rates would be kept the same and most analysts expect that this trend will continue. Typically, this sort of announcement has a positive impact on the value of both traditional and novel assets.

Take cryptocurrency, which saw positive market movements after the last decision was announced by the Fed. Lower or steady interest rates mean that there will be more disposable income for investors to put into the market and this brings in a sense of optimism. There have already been early signs of this with a $6.8 billion inflow into the US stock market in the last week alone.

As we will soon finally hear what the Fed has decided this time, volatility indicators remain high. Another thing that should trigger some level of volatility will be the inflation statements for the month of November. If the numbers show a high rate of inflation, it could put a damper on investor sentiments and lead to lower investment rates.

High rates of inflation, just like interest rates usually signal less disposable income and thus, less investments. Many investors look to these indicators to see whether the market is safe to invest in now and how they should approach it moving forward.

At the end of the day, these events will not only influence market volatility in the short term but will also set the tone for the market going into 2024. Several asset markets like cryptocurrency were pessimistic coming into 2023, though these sentiments have changed in the last few months.

Bitcoin has crossed several resistance points and some market watchers are gearing up for a bull run. But even the effects of Bitcoin and other tokens’ price spikes haven’t been the same across the board. Coinbase, for example, has seen a bit of a dip in its share price and some cautious investors don’t want to be too optimistic.

Essentially, market watchers aren’t yet sure what to make of things and these two events could give a bit more clarity. And as we enter into 2024, these factors will continue to affect both the overall mood of the market, how investors engage with it, and ultimately, how traditional and non-traditional assets will perform.

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