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Bitcoin (BTC) price rebounds after the Fed kept rates stable
As expected, the Federal Open Market Committee of the US Federal Reserve left the range of the reference federal funds rate unchanged at 5.25-5.50% on Wednesday.
Furthermore, more or less as expected, the FOMC recognized this that progress on reducing inflation has stalled this year and said it would be inappropriate to cut rates until there was greater confidence that inflation was moving “sustainably” towards 2%.
The price of bitcoin (BTC) rebounded modestly in the minutes following the news, but remains under pressure, down more than 4% for the session at $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. All else being equal, the move will likely increase risk appetite and asset prices, economist Joseph Brusuelas wrote.
Markets entered 2024 expecting a long series of rate cuts from the US central bank, but those hopes have been sharply reduced in recent weeks as the economy continues to show strength and inflation has actually risen slightly in the first four months of the year. . Second the FedWatch ECM tool, markets (prior to today’s Fed decision) were pricing in a nearly 25% chance of rate cuts to zero this year. A month ago, there was only a 1% chance that the Fed would not ease measures in 2024.
This shift in expectations has weighed on traditional markets a bit, 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 its maximum from the beginning of the year to the end of March. . It also likely contributed to the collapse of bitcoin’s price, which is now down more than 20% from its mid-March all-time high above $73,000.
A check of traditional markets shortly after the FOMC announcement finds stocks little changed and dollar and bond yields slightly lower. Gold rose 0.5% to $2,316 an ounce, but remains down about 4% from its record high of more than $2,400 hit in mid-April.
More clues to the Fed’s thinking will come shortly when Chairman Jerome Powell holds his post-meeting press conference at 2:30 pm ET.