News
Bitcoin (BTC) price returns gains on aggressive Fed outlook
As expected, the U.S. Federal Reserve’s Federal Open Market Committee maintained its benchmark federal funds rate range at 5.25%-5.50% on Wednesday, but its economic outlook now calls for only a 25-point rate cut basis this year.
“There has been further modest progress towards the Committee’s 2% inflation target in recent months,” the FOMC said in its political statement. The “modest” wording is notable because the previous policy statement lamented a “lack of progress” towards lower inflation.
Update of its economic projections, the Fed’s median expectation for the federal funds rate at year-end 2024 is now at 5.1% versus 4.6% three months ago. That means the central bank now expects a rate cut of just 25 basis points this year versus 75 previously. The Fed Funds expectation for the end of 2025 is now 4.1%, suggesting a 100 basis point rate cut next year.
In the post-meeting press conference, Fed Chair Jerome Powell said that inflation remains too high and that the central bank’s focus remains on bringing that indicator back to the 2% target.
This morning, the US consumer price index report for May showed an unexpected slowdown of inflation last month. The news sent cryptocurrency, stock and bond markets sharply higher as traders raised their expectations for the start of Fed rate cuts.
The aggressive turn in the Fed’s economic projections, later confirmed by Powell in his press conference, took away momentum from those rallies. Bitcoin (BTC) as of 19:00 UTC it was back at $67,300, unchanged over the past 24 hours. US stocks and bonds ended the day higher, but well off the session highs.
Update (19:15 UTC, 6/12/24): Adds commentary from Powell’s press conference and price reaction.