As expected, the Federal Reserve's Federal Open Market Committee on Wednesday kept the benchmark range for the federal funds rate unchanged at 5.25% to 5.50%.
Also, almost as expected, the FOMC acknowledged that progress in lowering inflation has stalled this year, and it is appropriate to lower interest rates until there is greater confidence that inflation is on a “sustainable” path toward 2%. He said it was not.
Bitcoin (BTC) price rebounded slightly in the minutes after the news broke, but remains under pressure, falling more than 4% during the session to $58,000.
In addition to the interest rate news, the FOMC announced that it would slow the reduction in U.S. Treasuries it holds on its balance sheet, so-called quantitative tightening (QT), from $60 billion per month to just $25 billion. All else being equal, the move is likely to boost risk appetite and asset prices, economist Joseph Brusuelas wrote.
Markets entered 2024 expecting an extended period of interest rate cuts from the U.S. central bank, but those expectations have dwindled from past numbers as the economy continued to show strength and inflation actually rose slightly in the first four months of the year. It was rapidly shattered within a week. . According to the CME FedWatch tool, the market (prior to today's Fed decision) had priced in a nearly 25% chance of a zero rate cut this year. A month ago, there was only a 1% chance the Fed would not ease in 2024.
This change in expectations has weighed on traditional markets slightly, with the Nasdaq down about 5% since hitting a 2024 high about three weeks ago and the S&P 500 down about 5% since hitting a year-to-date high in late March. The level has declined. . This also likely contributed to the plummeting price of Bitcoin, which is currently down more than 20% from its all-time high of over $73,000 in mid-March.
A check of traditional markets immediately after the FOMC announcement found that stock prices were little changed, while the dollar and bond yields were slightly lower. Gold rose 0.5% to $2,316 an ounce, but is still down about 4% from its all-time high of more than $2,400 in mid-April.
More clues about the Fed's thinking may come soon, with Chairman Jerome Powell scheduled to hold a post-meeting press conference at 2:30 p.m. ET.
