The US Federal Reserve recently announced a much-anticipated rate cut of 0.25%, a decision aimed at fostering a more balanced economic environment. During the press conference held to discuss this move, Fed Chairman Jerome Powell emphasized the rationale behind the decision and indicated a cautious stance towards any future rate adjustments. Despite this strategic move, the announcement led to significant declines in both the US stock market and the cryptocurrency market.
US Fed Rate Cut & Inflation Goals: Key Insights
On the day of the announcement, the US Federal Reserve reduced the Fed Fund interest rate to 4.5%, marking the third major adjustment this year. The initial reduction occurred on September 18, bringing the rate down to 5%. This was followed by another decrease on November 7, lowering it further to 4.75%. Powell reiterated the Fed’s commitment to bolstering the nation’s economy and labor market, while also stressing the absence of a rigid plan for future rate changes. He highlighted that any subsequent rate adjustments would depend on three critical factors: new economic data, the economic outlook, and the potential risks to both the economy and inflation.
At the start of the year, the US inflation rate stood at 3.1%, hitting a peak of 3.5% in March. Notably, the period from March to September saw a steady decline, reaching a low of 2.4% in September. However, since then, inflation has been on the rise, with November’s rate reaching 2.7%.
Market Reactions: Stocks and Cryptocurrency Take a Hit
The announcement of the rate cut on December 18 triggered a notable downturn in the cryptocurrency market, which fell by approximately 0.58%. Bitcoin’s value, for instance, started the day at $106,080.05 but dropped to $100,207.97 by the end of the day, representing a significant decrease of 5.85%. Similarly, the S&P 500 index experienced a considerable decline, dropping by over 2.90%.
Altcoins Face Steeper Challenges
Alongside Bitcoin, altcoins also faced substantial challenges. At the beginning of December 18, the total market capitalization of the crypto market, excluding Bitcoin, was valued at $1.53 trillion. By the close of the market, this figure had fallen to $1.42 trillion, marking a significant decline of 7.74%. In the past 24 hours, Ethereum saw a decrease of over 4.7%, while XRP dropped by 6.8%, BNB by 1.6%, Solana by 3.3%, Dogecoin by 6.2%, and Cardano by 4.9%.
In conclusion, the Federal Reserve’s cautious yet hawkish outlook suggests that both stock and cryptocurrency markets may continue to face extended challenges. As the economic landscape evolves, stakeholders will need to remain vigilant and adaptable to navigate these turbulent times effectively.
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