- The Federal Reserve has no plans to cut rates in Q1.
- Fed Chair Jerome Powell expressed a lack of confidence in cutting interest rates.
- The crypto market spiraled following the central bank’s hawkish tone.
US Interest rates are at an all-time high, and the Federal Reserve is relentlessly trying to steer them towards their target of 2%. Following eleven consecutive rate hikes since March 2022, the FOMC proposed in December 2023 to introduce three rate cuts in 2024, stirring excitement and a sense of relief in the market.
However, as anticipations of potential rate cuts reached unprecedented levels, the Federal Reserve, in typical fashion, dampened the festivities by adopting a hawkish tone, rocking the crypto market, particularly Bitcoin, in its wake.
Federal Reserve Not Confident About Rate Cuts
Federal Reserve chair Jerome Powell poured cold water on expectations of an imminent interest rate cut in March during Wednesday’s FOMC press conference, asserting that was not the “base case” as the central bank works on easing monetary policy this year.
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Although a recent dip in inflation sparked speculations about the Fed cutting interest rates as soon as its next meeting, Powell emphasized the need for “greater confidence” before such a decision could be made.
“Based on the meeting today, I don't think it's likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to [cut]."
Jerome Powell said in comments that sent the crypto market spiraling toward its doom.
In the aftermath of the Fed’s hawkish tone, Bitcoin slid by 5%, slipping below $42,000 from $43,700. Major altcoins, including Ethereum, Solana, and Cardano, followed suit, experiencing drops of at least 10%. According to Coinglass, over $200 million in crypto-tracked futures were liquidated following Powell’s press conference.
Powell’s hawkish comments signal that the Fed will likely maintain interest rates at 5.25%-5.5% until at least Q2 2024. According to the CME FedWatch Tool, the odds of a March rate cut have been trimmed to 34.5%, down from about 65% before today’s developments.
On the Flipside
- The FOMC has kept interest rates unchanged for four straight months.
- Following the Fed chair’s comment, traditional markets suffered their worst day in four months.
- Over 98% of analysts predict the FOMC will remain hawkish until May 2024.
- While the economy exhibits robust activity levels, experts caution that Powell’s non-committal stance on future rate hikes might create uncertainty and hinder long-term planning for businesses and investors.
Why This Matters
FOMC meetings provide crucial insights into the economic market’s health, making them highly relevant for the cryptocurrency community. The Federal Reserve’s interest rate decision could shape the market’s trajectory for the rest of 2024.
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