Markets reacted quickly to the Fed's decision. The S&P 500, an index that includes the 500 largest US companies, rose 0.94% in less than two minutes, while gold rose 0.87%.
Jerome Powell, Chairman of the Fed.
The US Federal Reserve cut interest rates by 0.5% at its meeting on Wednesday (18), a move considered aggressive. Bitcoin benefited from this, jumping from $60,000 to $60,900 shortly after the news.
According to an official statement from the Fed, they are confident that inflation is moving towards their 2% target and now need to balance recession-related risks caused by this pressure on the economy.
This may be linked to the revision to employment data last month, which found that the US added 818 fewer jobs than previously reported.
🟢 This is the first reduction since March 2020.
📜 The FOMC cited “progress on inflation and balance of risks” as reasons for the cut.
💵 The cut could ease the market and favor investments in emerging countries.
📈 The dollar has accumulated an increase of almost 12% this year, but has started to lose strength.
📊 Inflation is closer to the 2% target, but is still considered high.
🌍 Lower interest rates in the US could impact the global economy.
Bitcoin surges on Fed meeting
Markets reacted quickly to the Fed's decision. The S&P 500, an index that includes the 500 largest US companies, rose 0.94% in less than two minutes, while gold rose 0.87%.
Bitcoin was the biggest gainer, rising 1.45% as it jumped from $60,000 to $60,900.
Bitcoin surges after 0.5% US interest rate cut, faces volatility, but this could be the start of a bull market recovery. TradingView.
Even showing great volatility with a retreat to the point of origin, mainly because many were already expecting a cut of this size, investors have good reasons to believe in good returns in the medium and long term.
That's because lower interest rates mean that safer investments, like US Treasury bonds, will be yielding less, forcing money to seek riskier opportunities.
🟢 The expectation is that further cuts will continue in the following months and extend over the next few years until the American economy reaches equilibrium.
Fed eyes cut consequences
Inflation of 2.5% remains far from the Fed's 2% target. In any case, the risk of a recession appears to be a bigger concern for the US central bank, which could have cut interest rates by 0.25% but opted for double that percentage.
“In light of progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 0.5 percent, to 4.75 percent to 5 percent.”
Although Jerome Powell says his team will be watching the economy's reaction to this cut, especially inflation, the cut is aggressive enough to make it seem like they are resolute about the future.
Further comments from the Fed chairman, who will answer questions from journalists, can be seen in the video below. Statements that provide clues about upcoming meetings should also continue to affect the prices of assets such as stock markets and cryptocurrencies.
