In a highly anticipated move, the US Federal Reserve has concluded its last policy decision for 2024 following a comprehensive two-day Federal Open Market Committee (FOMC) meeting. The decision, which aligns with market expectations, involves a 25 basis points (bps) reduction in interest rates, setting them at a range of 4.5% to 4.75%. This decision marks the third consecutive rate cut, following a 0.5% reduction implemented in September, and it reflects a shift in the Fed’s projection for the coming year, scaling down expected rate cuts from four to three.
Market Reactions and Expectations
Wall Street had largely anticipated this move, with the central bank reducing the benchmark interest rate for the second consecutive meeting. Prior to this announcement, in November, the rate was lowered to the current range. The market was almost certain of this rate cut, with the CME Group’s FedWatch tool indicating a 99% probability of such an outcome.
This policy decision follows closely on the heels of Donald Trump’s significant victory in the 2024 US presidential elections. During the September meeting, the Fed made a notable reduction of 50 basis points, setting the benchmark interest rate between 4.75% and 5% for the first time in four years, as confidence grew among policymakers regarding inflation nearing its target levels.
Fed Not In A Hurry To Slash Rates
The US Fed has projected a gradual decrease in the benchmark interest rate, estimating a half-point reduction by the end of this year, an additional full percentage point in 2025, and a final half-point cut in 2026, ultimately reaching a range of 2.75% to 3.00%. Jerome Powell, the Fed Chair, has emphasized a cautious approach, indicating that the committee is in no rush to expedite rate reductions.
Goldman Sachs analysts have highlighted a speech by Beth Hammack, president of the Federal Reserve Bank of Cleveland. She stressed that sustained economic growth, a robust labor market, and persistent inflation justify maintaining a modestly restrictive monetary policy. This approach, she suggests, will help achieve the target inflation rate of 2% efficiently and sustainably.
Impact On Cryptocurrency Markets
The implications of the Fed’s rate cut extend to the cryptocurrency market, particularly for Bitcoin. Min Jung, a research analyst at Presto Labs, expressed that while a rate cut is beneficial for Bitcoin’s valuation, the market had already anticipated the 25 bps reduction in December. Consequently, the actual 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, along with Jerome Powell’s comments on future rate cuts. Any unforeseen developments or surprises from these projections are expected to significantly influence Bitcoin’s price dynamics.
As Trump’s inauguration nears, there is potential for further rallies in the crypto market, especially if the president-elect decides to implement the Strategic Bitcoin Reserve. Bitcoin recently paused after reaching an unprecedented high of $108,268, as traders awaited the Fed’s interest rate decision and optimism surrounding the strategic Bitcoin reserve plans. Currently, Bitcoin is trading at $103,919, experiencing a decline of over 2% in the past 24 hours.
