📉The Federal Reserve cuts interest rates by 25 basis points, in line with market expectations; Powell's hawkish remarks lead to a market decline
In its latest interest rate decision, the Federal Reserve has cut rates by 25 basis points as expected, lowering the federal funds rate target range to 4.25%-4.5%, which aligns with basic market expectations. This is the third consecutive meeting where the Federal Reserve has announced a rate cut, bringing the total rate cut for the year to 100 basis points.
The Federal Reserve mentioned in its statement that recent economic data shows steady growth in economic activity, a easing labor market, rising unemployment rates but still at low levels, and inflation is close to the target but has slightly increased.
The Federal Open Market Committee (FOMC) aims for inflation to reach 2%, and to support these goals, the Committee will continue to reduce its balance sheet plan, which has received the support of most members, but Cleveland Fed President Beth Hammack (a voting member of the FOMC in 2024) opposed, arguing that interest rates should be maintained at 4.5%-4.75%.
The Federal Reserve's dot plot indicates that it expects to cut rates twice in 2025, down from four cuts projected in September, while inflation is expected to reach the 2% target level by 2027, delayed from the previously expected 2026.
This suggests that the Federal Reserve will reassess the magnitude and timing of future rate cuts and will carefully evaluate based on the latest data and changing outlooks and risks.
Meanwhile, Federal Reserve Chairman Powell stated in a press conference that the Federal Reserve is not permitted to hold Bitcoin and does not anticipate changes to relevant legal provisions. Following these remarks, the U.S. stock market immediately responded with a decline. By the close of the market, the Dow Jones Industrial Average had dropped by 2.58%, the Nasdaq had fallen by 3.56%, and the S&P 500 index decreased by 2.95%.
Additionally, the entire cryptocurrency market was also significantly affected, as data from Coinmarketcap showed that BTC had fallen by 5.71% and Ethereum by 7.27% over the past 24 hours.
This indicates that the market is sensitive to Powell's remarks, and investors are highly attentive to changes in the Federal Reserve's policies and regulatory stance.
