Fed Lowers Rates by 25 Basis Points as Crypto Market Declines
The Federal Reserve has reduced its benchmark interest rate by 25 basis points, bringing it to a range of 4.25%-4.5%. This decision comes despite mixed signals from the economy, prompting cautious forecasts for the future.
Key Economic Highlights:
The new rate is 1% lower than the level in September when the Fed began rate cuts.
The Federal Reserve predicts GDP growth of 2.5% in 2024, gradually slowing to 2.0% by 2027.
Unemployment is expected to rise to 4.3% by 2025.
Inflation (PCE index) is forecasted to stay above the Fed’s 2% target, reaching 2.4% in 2024 and 2.5% in 2025.
Impact on the Crypto Market:
The announcement triggered a wave of de-risking among crypto investors, leading to significant losses across the market:
Bitcoin dropped 4%, falling from its yearly peak of nearly $108,000, dragging the entire crypto market down by 5% in just 24 hours.
Ethereum declined by 5%, and Solana fell 6% from their weekly highs of $4,100 and $230, respectively.
What’s Next?
Economists now anticipate only two additional rate cuts in 2025, reflecting a more cautious approach to monetary policy. Meanwhile, the market is keeping a close eye on the incoming Trump administration’s policies, including potential tariffs and deportation measures, which could further shape the Federal Reserve’s next moves.
Since Trump’s election on November 6, the so-called "Trump trade" has fueled a surge in cryptocurrencies. Bitcoin has risen by over 50%, while some altcoins have skyrocketed by more than 200%.
Conclusion:
The Fed’s rate cut and ongoing economic uncertainty have cast a shadow over the crypto market, with traders opting to reduce their risk. As investors await clearer signals from both the Fed and the new administration, markets are likely to remain volatile in the coming months.