- The U.S. Federal Reserve cut interest rates by 0.25% on Wednesday.
- The rate cut was widely anticipated, with futures data predicting over 99% chance of the move.
- Bitcoin and Ethereum prices fell following the rate cut and cautious remarks from Fed Chair Jerome Powell.
- The Fed’s decision followed signs of a slowing U.S. economy despite inflation remaining above the 2% target.
- The voting on the rate cut was not unanimous; two members dissented for a larger cut or no change.
The U.S. Federal Reserve lowered its benchmark interest rate by 0.25% on Wednesday, amid concerns about a slowing economy. This move sets the federal funds rate target range between 3.75% and 4%. The rate cut was broadly expected by financial markets.
The most recent data showed the Consumer Price Index increased by 3% over the last 12 months through September, which remains above the Fed’s 2% inflation goal. Meanwhile, an unemployment rate of 4.3% and economic sentiment indexes indicate some economic slack. The Fed stated it acted “in light of the shift in the balance of risks” to the economy.
Before the announcement, the CME FedWatch Tool, which analyzes futures data to gauge market expectations, assigned a more than 99% chance to the rate cut. The tool also showed over a 90% probability of another 0.25% cut in December. Despite this, prices for cryptocurrencies fell after Fed Chair Jerome Powell said a December rate cut was “not a foregone conclusion.” Bitcoin dropped about 1.3% to around $110,700, while Ethereum declined by about 2.7% to $3,890.
Gerry O’Shea, head of global market insights at a crypto asset manager, noted the rate cut had been widely anticipated and expected to have limited short-term impact on digital asset prices. He added that other factors, such as a potential government shutdown and major company earnings reports, may influence market movements more this week.
The Fed’s decision was not unanimous. Board member Stephen Miran voted for a 0.50% reduction, while Jeffrey Schmid preferred keeping rates unchanged. Investors also awaited comments on ending the Fed’s quantitative tightening, a process of reducing Treasury and mortgage-backed securities holdings intended to support financial markets.
Last month, the Fed made its first rate cut since the previous year, reducing rates by 0.25%. This followed periods of inaction that had drawn public criticism. Despite near-term market volatility, some analysts remain optimistic about bitcoin’s potential to surpass previous highs later this year.
The Fed’s monetary policy shift reflects a cautious approach balancing inflation concerns with signs of economic weakening. The Conference Board’s Expectations Index remains below levels that usually indicate a recession, signaling continued economic uncertainty. For further details, see the Fed’s statement and the previous rate cut announcement.
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