News & Analyses

Bitcoin price reclaims $59K as Fed leaves rates unchanged

  • Federal Reserve has paused interest rates, leaving them unchanged at 5.25%-5.50%.
  • FOMC highlights “lack of further progress” toward inflation target in recent months, but is “strongly committed” to returning inflation to 2% target.
  • Bitcoin price reclaimed $58,000 area as Fed report improved market sentiment, signaling a more accommodative monetary policy environment.

The market was at the edge of its seat on Wednesday to see whether the US Federal Reserve (Fed) would cut interest rates during the Federal Open Market Committee (FOMC) meeting. It came after a flash crash in the cryptocurrency market that saw Bitcoin price dip below $60,000 ahead of the announcement.  

Also Read: Bitcoin price unphased as Fed’s hope for a pivot gets overwhelmed

Fed leaves rates unchanged

The Fed stuck to expectations in the Wednesday FOMC meeting, leaving interest rates unchanged at 5.25%-5.50%, marking a sixth consecutive decision to keep the fed funds rate steady . It also revealed plans to slow the pace of its balance sheet reductions.

The decision comes as the economic data has given Fed officials some sort of confidence in where the economy is headed.

Inflation has eased over the past year but remains elevated.

The Fed noted that risks to achieving its employment and inflation goals “have moved toward better balance over the past year,” a slight change from the March policy statement, which stated that these risks “are moving into better balance.”

The Fed also acknowledged that economic activity continues to expand at a solid pace, with strong job gains and a low unemployment rate.

The highlights of the report include:

  • Rate cuts not appropriate until greater confidence inflation is heading to 2%
  • Fed notes “lack of further progress” toward 2% inflation goal
  • Fed to slow pace of balance sheet runoff starting in June
  • Inflation has eased “but remains elevated”
  • Job market gains “have remained strong” 
  • Higher for longer is officially back

The primary lesson here is that the Fed has lost confidence in their fight against inflation, meaning rate cuts may not come anytime soon.

In the immediate aftermath of the announcement, Bitcoin price reclaimed territory above $59,000. The market had widely priced in a rate hike, following the previous meeting where the Fed’s hope for a pivot got overwhelmed. The pause has influenced a shift in market sentiment.

  • A pause or lower interest rates can drive up inflation expectations, making non-inflationary assets like Bitcoin more attractive as a hedge against inflation.
  • A pause in interest rate hikes may signal a more accommodative monetary policy environment, which can lead to increased risk appetite among investors seeking higher returns. This could drive investment inflows into Bitcoin and other riskier assets.
  • Overall market sentiment tends to improve when interest rates remain stable or decrease, which could translate to more positive price movements for Bitcoin.

Specifically, the market appears to be factoring in a single interest rate cut in 2024, expected in December. At the time of writing, Bitcoin price is trading for $59,210, after an intra-day low of $56,552. 

BTC/USDT 1-day chart

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