Fed expected to hold rates as traders look to Warsh for inflation signals

What happened

The Federal Open Market Committee finishes a two-day meeting on Wednesday, October 28, releasing its policy statement at 2 p.m. ET and following it with a press conference from Chair Kevin Warsh at 2:30 p.m. ET. Few participants expect the target range to move from 3.75% to 4.00%, where it has sat since the Fed raised rates in September.

Pricing supports that view. CME FedWatch, which derives probabilities from interest rate futures, puts the chance of a hold above 90%, while prediction markets are a few points higher, according to Decrypt. Coinpedia reported that investors broadly anticipate no change and are treating the Fed's commentary on inflation and the path for rates as the more consequential part of the afternoon.

Crypto markets have been positioning around the announcement. Bitcoin traded around $80,700, Decrypt reported, after slipping below $80,000 on Tuesday and recovering toward $81,000, a move Coinpedia also described. Crypto Daily noted the price had bounced from about $79,400 back above $81,000. Ethereum changed hands near $2,300, with XRP and Solana also gaining ahead of the statement, Coinpedia said.

Why it matters

The federal funds rate, the rate banks charge each other for overnight loans, underpins what households pay on credit cards and other borrowing, so the decision reaches past trading desks. For crypto, the transmission runs mainly through government debt. With the 10-year Treasury yield hovering near 5% after touching 5.31% on October 5, investors can earn a near-risk-free return without holding a volatile asset, and bitcoin pays no yield. When yields rise, capital has tended to drift away from riskier holdings such as crypto and equities.

Leverage adds to the sensitivity. Borrowed money used to enlarge positions tends to magnify swings around Fed events, and exchanges automatically close positions when prices move against traders, a liquidation that can intensify selling. Decrypt noted that roughly $481 million in crypto positions were liquidated within 24 hours of Warsh's Jackson Hole speech in August, more than $360 million of them bets on higher prices.

What the data shows

Consumer prices rose 3.7% in the 12 months through September, the Labor Department reported, with gasoline up 9.1% in the month alone. Hiring has cooled: employers added 29,000 jobs in September against forecasts of roughly 90,000, and unemployment stood at 4.2%. Oil near $100 a barrel, which Decrypt attributed to supply pressure from the U.S.-Iran war, feeds through to fuel and shipping costs. Futures and prediction markets assign 75% to 80% odds to a quarter-point increase at the December 8-9 meeting. No updated economic projections are due at this meeting; those arrive in December.

Background

September's increase was the Fed's first since 2023 and passed on a unanimous 12-0 vote. The minutes show most officials thought another increase would probably be warranted by year-end, and several described the current setting as "not restrictive or only mildly restrictive." Warsh has declined to signal future moves, telling reporters in September, "This won't surprise you: I'm not in the forward guidance business," and saying he would not prejudge future decisions. Analysts have taken to describing the likely result as a hawkish hold, in which rates stay put while the statement keeps additional tightening on the table. The July vote was 9-3, with three members favoring a hike.

What to watch

Dissents are the clearest signal in the statement, Decrypt noted, since a vote for tightening would suggest December is close to settled. Crypto Daily flagged upcoming PCE inflation data as a second potential catalyst alongside the Fed's tone. On price levels, Coinpedia identified holding above $81,000 as the precondition for a move toward $82,500 and $84,000, with a drop below $80,000 opening the way toward $77,000. Because the rate decision is largely priced in, the guidance that follows may matter more for bitcoin than the number itself.

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