Bitcoin
Bitcoin (BTC) Price Jumps After Fed Keeps Rates Stable
As expected, the US Federal Reserve’s Federal Open Market Committee on Wednesday left its federal funds benchmark rate range unchanged at 5.25-5.50%.
Also pretty much as expected, the FOMC recognized that progress in reducing inflation has stalled this year and said it would not be appropriate to cut rates until there is greater confidence that inflation is moving “sustainably” towards 2%.
The price of bitcoin (BTC) has risen modestly in the minutes since the news arrived but remains under pressure, falling more than 4% on the session to $58,000.
In addition to the rate news, the FOMC announced that it is slowing the reduction of Treasury securities held on its balance sheet – so-called quantitative tightening (QT) – from $60 billion per month to just $25 billion per month . Other things being equal, the measure should increase risk appetite and asset prices, wrote economist Joseph Brusuelas.
Markets entered 2024 expecting a long series of rate cuts from the U.S. central bank, but those hopes have been sharply dampened in recent weeks as the economy continues to show strength and inflation has actually risen a bit. in the first four months of the year. . According to the CME FedWatch tool, markets (before today’s Fed decision) were predicting a nearly 25% probability of zero rate cuts this year. A month ago, there was just a 1% probability of no Fed easing in 2024.
This shift in expectations has weighed on traditional markets somewhat, with the Nasdaq down about 5% since hitting its 2024 high about three weeks ago and the S&P 500 down a similar amount since hitting its year-to-date high late of March. . It also likely contributed to the decline in the price of bitcoin, which is now down more than 20% from its mid-March high above $73,000.
A check of traditional markets shortly after the FOMC announcement reveals that stocks remain little changed and dollar and bond yields slightly lower. Gold rose 0.5% to $2,316 per ounce but remains about 4% below its record above $2,400 reached in mid-April.
More clues about the Fed’s thinking will emerge soon when Chairman Jerome Powell holds his post-meeting press conference at 2:30 pm ET.