Fed Holds the Line, $BTC Holds Its Breath: Traders Wait for Warsh’s Rate-Signal Punchline

The Federal Reserve is expected to leave interest rates unchanged at its 2 p.m. ET decision today, according to markets pricing a hold with more than 90% probability through CME FedWatch, while prediction markets assign slightly higher odds. The federal funds rate, which banks charge one another for overnight loans, has remained at 3.75% to 4.00% since the Fed raised it in September, its first hike since 2023, in a unanimous 12-0 vote. Fed Chair Kevin Warsh will address the media after the two-day meeting concludes on Wednesday, October 28.

Inflation remains the central policy issue. Consumer prices rose 3.7% in the 12 months through September, according to the Labor Department, while gasoline prices climbed 9.1% during the month and were 34.2% higher than a year earlier. Employers added 29,000 jobs in September against forecasts of about 90,000, and the unemployment rate stood at 4.2%. Oil prices near $100 a barrel amid the U.S.-Iran war have increased pressure on gasoline, shipping and other consumer costs.

The 10-year Treasury yield is hovering around 5% after reaching 5.31% on Oct. 5, providing a higher-yielding benchmark for investors considering riskier assets. Bitcoin, which pays no yield and is volatile for traditional investors, was around $80,700 and recently fell as low as $76,877 on Friday after reaching $81,455 overnight. The decline surrendered most of a double-digit weekly gain following Warsh’s first Jackson Hole keynote in August, when he warned that inflation was not cooling fast enough.

Liquidation risk is amplifying the market reaction to Fed events. After Warsh’s August speech, about $481 million in crypto positions were liquidated within 24 hours, including more than $360 million in bets on higher prices. Leverage can magnify moves, with exchanges closing positions when collateral falls below required levels and adding to selling pressure.

Attention is already shifting toward December. Futures and prediction markets currently give the Dec. 8-9 meeting a 75% to 80% probability of another quarter-point hike. Minutes from September’s meeting showed that most officials believed another increase would likely be appropriate by year-end, with several describing the current rate as “not restrictive or only mildly restrictive.”