As it has done since US inflation reached 10%, the Fed once again stated this Wednesday (12) that its commitment is to lower it to 2%. According to the text, the team led by Jerome Powell seems to be calmer.
Jerome Powell, Chairman of the Fed, speaking about the American economy. Source: Federal Reserve.
As expected by the market, the US Central Bank did not change interest rates, leaving rates between 5.25% and 5.5%. Shortly after the decision was published, Bitcoin fell just over 1%, from 69,800 to US$68,800, but is now recovering.
Bitcoin falls, but recovers, after Fed meeting. Source: TradingView.
Last Friday (7), Bitcoin began a fall from US$72,000 to US$67,000 following the release of US employment data, used by the Fed to make interest rate decisions.
However, Bitcoin showed a recovery this Wednesday (12) before the meeting, rising from US$67,000 to US$69,800. This is because other data showed that American inflation came to zero in May.
May inflation data in the US. Source: BLS.
Despite this being the best number in recent months, annual inflation is 3.3%, still far from the Fed's target.
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Due to these two data, with the economy still strong (creating jobs) and inflation far from 2%, it is possible that the American Central Bank is comfortable keeping interest rates as they are for longer.
Fed repeats the same lines, but market is optimistic
As it has done since US inflation reached 10%, the Fed once again stated this Wednesday (12) that its commitment is to lower it to 2%. According to the text, the team led by Jerome Powell seems to be calmer.
“The Committee seeks to achieve maximum employment and inflation at a rate of 2% over the long term,” the Fed commented. “The Committee considers that the risks to achieving its employment and inflation objectives have evolved toward better balance over last year.”
In other words, the risk of a recession appears to be distant and, at the same time, inflation is moving towards the American Central Bank's objective.
Although Bitcoin showed a brief decline of around 1%, the market is more buoyant. This is because the CME forecast tool points to a 79.6% chance that there will be two cuts in 2024. Previously, this number was just 52.4%.
Market is more confident in 2 interest rate cuts in 2024. Source: CME FedWatch Tool.
Finally, investors can hope for a good end to the year. This is because in addition to possible interest rate cuts, the US could also elect a pro-Bitcoin president in November. This week, Donald Trump defended the sector again, now talking about mining companies.
As of this writing, Fed Chairman Jerome Powell is commenting on the decision live. As he may reveal clues about the American BC's next steps, it is possible that his statements will affect the price of Bitcoin again in the next few minutes.
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