Three breaks, one direction. On Monday, we announced a “super week” for central banks with three verdicts in three days. Here they are. The Fed, ECB and Bank of Japan have all left their rates unchanged. However, each took care to leave the door wide open to an increase in December. Like Berlioz, they chose to let time take its course, and the crypto market is paying for the wait.
Bitcoin is trading at $77,311 this Friday, down 3.4% over 24 hours according to CoinGecko. He finds himself caught between the Binance hack and the central bankers who are saving their next turn of the screw for the end of the year.
The key points of this article:
The Fed remains at 3.75-4.00%, but two FOMC members voted for an immediate hike.
The ECB maintains its deposit rate at 2.50%, and Christine Lagarde announces her departure for February 7, 2027.
The Bank of Japan keeps 1.25%, judges its inflation target achieved and accelerates the sale of its ETFs.
The three institutions suggest an increase in December, an unfavorable scenario for risky assets like bitcoin.
Fed: Warsh promises nothing, two voices have already called for an increase
On Wednesday, October 28, the FOMC maintained its key rate between 3.75% and 4.00%. The FOMC is the monetary policy committee of the Fed, and the vote was 10 votes to 2. Two members would have preferred to raise rates by a quarter of a point: Lisa Cook, governor of the Fed, and Beth Hammack, president of the Cleveland Fed. A month earlier, on September 16, the increase was voted unanimously.
Kevin Warsh was careful not to decide. Journalists questioned him several times about the meeting of December 8 and 9. However, the president of the Fed did not let anything filter through on the trajectory of rates. He preferred to announce a 2027 calendar of eight meetings. One of them will be devoted to monetary strategy alone, without a vote on rates.
The market has done its own reading. According to the CME's FedWatch tool reported by TheStreet, traders now estimate a roughly 78% chance of a 25 basis point hike in December. Robert Sockin, at PGIM, goes further and is counting on four quarter-point increases, one per quarter, starting in December. For bitcoin, each American increase makes the dollar more expensive and dries up the liquidity which nourishes risky assets.
BCE: Lagarde keeps 2.50% and prepares her exit
Thursday October 29, Frankfurt unanimously left its deposit rate at 2.50%. The board of governors nevertheless “discussed the advisability of an increase in rates”, admitted Christine Lagarde. She weighed her sentence about December to the word: “If the situation we are observing today, which could have justified an increase in rates, is going to be confirmed, in this case, the direction to take is quite clear. »
The situation in question can be summed up in one number. Eurozone inflation rose to 3.8% in September, from 3.2% in August. Additionally, energy prices “continued to rise,” according to the ECB’s monetary policy statement. On Monday, a Reuters poll already gave 64 economists out of 73 in favor of an increase in December.
The other announcement of the day overshadowed the decision. Christine Lagarde will leave the ECB on February 7, 2027, almost nine months before the end of her mandate. As the French presidential election approaches, she says she wants “freedom of speech, freedom of expression and the freedom to engage on subjects that do not relate to monetary policy”. His successor must be designated by the end of the year. The names of Klaas Knot and Pablo Hernández de Cos are already circulating.
Bank of Japan: 1.25%, one vote for 1.5% and ETFs sold faster
Friday, October 30, the Bank of Japan maintained its key rate at around 1.25%, its highest level since 1995. The decision was taken by 8 votes to 1. Hajime Takata proposed going directly to 1.5%. Above all, the BoJ now judges underlying inflation to be generally in line with its 2% target. It also raises its inflation forecast for the year to 2.6%, compared to 2.4% previously.
Kazuo Ueda also touched on a cumbersome legacy. The central bank had accumulated Japanese stock index funds for years to support the stock market. It will now sell them at the rate of around 860 billion yen per year from January 2027, compared to 330 billion so far. The Nikkei closed down 2.1%, at 63,290 points.
The yen initially climbed. The dollar fell from 157.79 to 157.12 yen immediately after the announcement, before returning to around 157.6. This movement matters for the crypto market because of the carry trade. This strategy consists of borrowing in low-cost yen to invest the money in more profitable assets, including bitcoin. A more expensive yen makes this arrangement less profitable and pushes investors to unwind it.
