Fed Cuts Rates for First Time in Four Years, Bitcoin Gains 2.8%
In a widely expected move, the Federal Reserve cut its benchmark interest rate 50 basis points on Wednesday, starting its easing cycle. The Federal Open Market Committee cut the federal funds rate to a target range of 4.75% to 5.00%, cutting rates for the first time since 2020.
If CME Group data is any indication, showing a 61% chance of such a decision just minutes before the announcement, the widely expected decision has sent ripples across both traditional and cryptocurrency markets.
Bitcoin (BTC) initially fell to $60,000 before bouncing above $61,000 after the Fed announced its decision. Currently, BTC is trading at $61,871, gaining 2.8% over the past 24 hours.
Fed Chair Jerome Powell labeled the heavy trim a "recalibration" in his post-meeting news conference. He noted that "while the economy continues to expand, the upside risks to inflation have diminished, and the downside risks to employment have increased."
The FOMC statement did note progress on inflation, which peaked at 9.1% in 2022 and has pulled back to 2.5% in the 12 months through August. But the committee warned that it still "remains somewhat elevated," which is its way of saying its work is far from complete.
Looking ahead, the Fed's "dot plot" projections reveal that policymakers envision the federal funds rate settling at 4.5% by the end of 2024-a more significant decline than projected earlier. The forecast for 2025 was cut to 3.25% from a prior projection of 4%.
While rejoicing in the improvement, Powell was quick to soften enthusiasm with comments like, "We're not saying mission accomplished or anything like that." He added there's more work to be done for sustainable price stability.
