Analyst: Inflation risks may limit the Federal Reserve's policy actions in 2025, thereby affecting risk assets

According to a report by The Block on December 16, PANews stated that according to the prediction of the CME FedWatch tool, there is a 97% probability of a 25 basis point rate cut at the Federal Open Market Committee (FOMC) meeting on December 18. Although lower interest rates usually encourage investors to allocate capital to risky assets such as Bitcoin, analysts warn that comments related to the FOMC meeting on Wednesday by the Federal Reserve may reduce market expectations for further rate cuts. The central bank will also release updated economic forecasts and dot plots, providing new insights into policymakers' outlook for 2025.

Despite expectations of rate cuts, concerns about inflation have complicated prospects. Recent CPI and PPI data in the United States have raised concerns about potential price pressures next year, especially considering speculation about President-elect Donald Trump's economic policies when he takes office in January 2025. Policies proposed by Trump - including tariffs, immigration control and personal and corporate tax cuts - could push up inflation.

Analysts from ING Bank said these developments could lead to slower and more cautious rate cuts in 2025. "The policy positions advocated by President-elect Trump such as immigration control, tariffs as well as personal and corporate tax reductions might mean that signals will be released from the Federal Reserve indicating it will take a gentler and slower path towards reducing interest rates in 2025," said an analyst from ING Bank. However, despite macroeconomic events still having influence QCP Capital analysts believe recent rises in Bitcoin are primarily driven by market sentiment.