Market participants had largely anticipated the rate hike halt on Wednesday, but Fed officials now anticipate substantially higher interest rates for next year than they had previously anticipated.
In a largely anticipated move, the United States Federal Reserve held monetary policy unchanged on Wednesday, maintaining its target interest rate range of 5.25% to 5.50%.
In addition, Fed officials predicted that interest rates would remain higher for the remainder of the year at about 5.1%, a considerable increase from the June projection of 4.3%. Additionally, they anticipate this year’s economic growth to be better, with a 2.1% real GDP gain predicted versus to a 1% estimate in June.
The Committee will consider the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments in determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, according to the Fed statement.
The price of Bitcoin (BTC) was stable around $27,200 in the moments after the central bank made its announcement, but it later dropped by about 1% to $26,900 after Fed Chair Jerome Powell stated in a news conference that the central bank will continue raising interest rates if the economy continues to perform better than anticipated.
Powell also stated that in order to achieve the Fed’s objective at the next two Federal Open Market Committee (FOMC) meetings, the majority of Fed members think one more rate hike is more likely than not appropriate. In addition, he agreed that the recent inflation trend is positive, describing the last three months’ readings as “very, very good.”
The FOMC’s upcoming policy meeting is scheduled to begin in early November. According to the CME’s FedWatch tool, after today’s events, market participants gave a 53.4% likelihood that rates would remain at their current level until the end of the year and priced in around a 71.5% chance that there would be no rate move at that meeting in November.
What’s next for BTC price?
It’s difficult us them to be overly optimistic about today’s announcement, Michael Silberberg, AltTab Capital’s head of investor relations, wrote in an emailed letter. The report’s emphasis on slower rate decreases in the future than originally anticipated came as a surprise.
The main news is the higher-than-expected rate prediction for 2024. Crypto and macro analyst Noelle Acheson stated in an email that this is a highly significant signal. It’s the signal given by effectively removing two rate cuts off the table, which also signals that any rate cuts will occur later than the market had anticipated.
She went on to say that higher rates, a stronger dollar, and stock market declines are bad for bitcoin (BTC), but recognized that the news was favorably received by the cryptocurrency markets, indicating that there may be some “buying support” at the present level.
Asgard Markets, a market research company, anticipated that some profit-taking would occur after the Fed’s announcement.
Following the Fed’s announcement, some profit-taking was anticipated by market research firm Asgard Markets. Positioning and sentiment aren’t as ‘offsides’ and ‘light’ as they were earlier this year, and there aren’t many new triggers on the horizon, so ‘in-the-money’ participants will take some chips off the table and evaluate,’ it stated in a note on Tuesday.
According to Zach Pandl, economist at Grayscale Research, the Fed has embraced the concept of a soft landing since they expect to return to their inflation objective while seeing greater growth and lower unemployment. The parent organization of CoinDesk, DCG, owns the asset management firm Grayscale.
The mid-1990s saw the last soft landing, which was quite successful for assets tied to technology. Although a soft landing is not guaranteed, it might be advantageous for cryptocurrencies like bitcoin and ether (ETH), he added.