The financial world was abuzz with dual excitement as Donald Trump secured a major electoral victory and the cryptocurrency market received a significant boost. This uplift can be attributed to the U.S. Federal Reserve’s recent decision to lower interest rates by 25 basis points. In response to these developments, Bitcoin’s value, which often reacts strongly to U.S. economic news, soared to nearly $77,000, maintaining a relatively stable position thereafter.
Fed Goes Easy on Monetary Policy
True to market expectations, the U.S. Federal Reserve announced a reduction in its benchmark federal funds rate by 25 basis points, adjusting it to a range of 4.5% to 4.75%. This decision aligns with moves by other global central banks to ease monetary policy, aiming to stimulate economic growth. As speculation about the rate cut built up, Bitcoin experienced a dramatic climb, reaching an unprecedented high of $76,700.
This decision to lower rates follows closely on the heels of Donald Trump’s electoral triumph. It is consistent with his long-standing advocacy for reducing interest rates as a means to fuel economic expansion. While Trump does not wield direct influence over Federal Reserve policies, the rate cut fits well within his broader economic agenda and campaign promises, where he frequently called for more significant interest rate reductions.
Marking a notable shift, this rate cut is only the second in a span of four years, breaking a prolonged period of static interest rates. The Federal Reserve’s press release highlighted some economic indicators, stating, “Since earlier in the year, labor market conditions have generally eased, and the unemployment rate has moved up but remains low. Inflation has made progress toward the Committee’s 2% objective but remains somewhat elevated.”
Earlier in the day, other central banks followed suit, with the Bank of England lowering its rates by 25 basis points, and Sweden’s Riksbank decreasing its key interest rates by half a percentage point. Following the FOMC’s decision, Bitcoin’s value stabilized at approximately $76,718, a new all-time high, with a 1.8% increase observed over the past 24 hours.
Will the Fed Maintain Current Rates?
Investor attention is now closely trained on Federal Reserve Chair Jerome Powell’s next moves regarding future monetary policy direction, particularly in the aftermath of Donald Trump’s conclusive election victory. The president-elect’s proposed policies, which include tax cuts, imposition of tariffs, and deregulatory measures aimed at spurring economic growth, could potentially ignite inflationary pressures. Such a scenario might prompt the Federal Reserve to reconsider its current stance, potentially leading to a pause or even reversal of its recent rate cuts.
Market sentiment has adapted to these developments, with the likelihood of the Federal Reserve maintaining its current interest rates at the December meeting now at 35%, up significantly from a mere 14% just a month ago, as indicated by the CME FedWatch Tool.
The recent positive news has sparked a robust rally in Bitcoin, with notable gains recorded throughout November. Bitcoin’s value surged as Donald Trump gained momentum in the presidential election, surpassing its previous all-time high established in March amid growing expectations of his potential return to the White House.
As of now, Bitcoin has experienced an 8% increase over the past week and an impressive 22% rise over the past month. With a market capitalization exceeding $1.5 trillion, Bitcoin has solidified its position as the ninth largest financial asset globally.
