The Federal Reserve of the United States announced on Wednesday the maintenance of its interest rates between 5.25% and 5.5%, a decision in line with market expectations, while confirming its rate-cutting outlook for the current year.
This moderate stance calms the concerns of investors who feared a more drastic shift in US monetary policy. According to forecasts from the members of the Federal Open Market Committee (FOMC), rates are expected to be reduced to 4.6% by the end of 2024, an estimate unchanged from last December’s predictions.
Anticipation and Market Reactions
Even before the FOMC announcement, most market participants anticipated an initial rate cut as early as June. The latest estimates, based on data from the CME FedWatch tool, now indicate that the probability of at least one rate cut by June stands at 70%, up from just over 60% previously.
This upward revision of expectations comes amid concerns over recent reports on the Consumer Price Index (CPI) and Producer Price Index (PPI), higher than expected, fueling fears of accelerating inflation.
Impact on Financial Markets and Cryptocurrencies
Tighter monetary policies tend to reduce risk appetite in financial markets, while lower rates make asset classes like cryptocurrencies more attractive.
It is in this context that the price of Bitcoin experienced notable fluctuations, rising from under $61,000 in the morning to over $68,000 just after the announcement of the FED’s rate hold.
