
The US Federal Reserve has concluded its eighth and final policy decision for 2024, following a comprehensive two-day meeting of the Federal Open Market Committee (FOMC). The central bank has opted to reduce interest rates by 25 basis points (bps), marking the third rate cut of the year. This decision aligns with Wall Street’s expectations, as analysts anticipated the Fed would maintain its strategy of lowering the benchmark interest rate by 25 bps for the second consecutive meeting. Prior to this, the rate was adjusted to a range of 4.50% to 4.75% in November, with market confidence bolstered by a 99% probability prediction from CME Group’s FedWatch tool.
The timing of this policy announcement coincided with a significant political event—the landslide victory of Republican Donald Trump in the 2024 US Presidential elections. The previous policy meeting in September witnessed a more substantial rate reduction of 50 basis points, adjusting the benchmark to a range of 4.75% to 5.00%. This was the first cut of such magnitude in four years, reflecting the policymakers’ belief that inflation was steadily progressing towards the target level.
Fed Not In A Hurry To Slash Rates
Despite the recent rate cuts, the US Fed policymakers project a gradual lowering of the benchmark interest rate. They foresee a further reduction by another half-point by the end of the year, followed by a full percentage point in 2025, and finally, a half-point decrease in 2026, settling within a 2.75% to 3.00% range. Jerome Powell, the Fed Chair, has made it clear that the committee is exercising caution with rate reductions, adopting a measured approach to ensure economic stability.
Goldman Sachs analysts highlighted a speech by Beth Hammack, President of the Federal Reserve Bank of Cleveland, who underscored the need for a modestly restrictive monetary policy. She cited robust economic growth, a resilient labor market, and persistent inflation as factors justifying this stance, aiming to bring inflation back to the 2% target in a sustainable manner.
Impact On Cryptocurrency Market
In the realm of cryptocurrency, the Federal Reserve’s rate cut has implications for Bitcoin and other digital assets. According to Min Jung, a research analyst at Presto Labs, a rate cut is generally viewed as favorable for Bitcoin’s price. However, the market seemed to have already anticipated the 25 basis point reduction in December, suggesting that the immediate impact on Bitcoin’s price may be minimal.
Jung pointed out that the focus will shift to the December FOMC meeting’s Summary of Economic Projections and remarks from Powell regarding future rate cuts. Any unforeseen developments or surprises emerging from these factors are likely to become the primary influences on Bitcoin’s price movements.
Recently, Bitcoin reached an all-time high of $108,268, momentarily pausing as traders awaited the Federal Reserve’s anticipated rate cut and the positive outlook from strategic Bitcoin reserve plans. This dynamic underscores the complex interplay between traditional monetary policy decisions and the rapidly evolving cryptocurrency market.