Fed Slashes Interest Rates By 25 bps
The Fed finally Announce This is the eighth and final policy decision of 2024 after the two-day Federal Open Market Committee (FOMC) meeting. It has lowered interest rates by 25 basis points to 4.5%-4.75%, in line with market expectations. This is the third consecutive rate cut since the 0.5% cut in September. It also reduced the number of job cuts expected next year. Fed officials agreed they would cut interest rates three times next year, down from four previously forecast in September.
It is worth noting that Wall Street had expected the central bank to cut the benchmark interest rate by 25 basis points (bps) for the second consecutive time after cutting it to 4.50% to 4.75% in November. The market is confident in a rate cut, with CME Group’s FedWatch tool showing a 99% chance of a rate cut.
The central bank’s final policy decision comes just after Republican Donald Trump’s landslide victory in the 2024 US presidential election. At its September meeting, the Fed cut its benchmark interest rate by 50 basis points for the first time in four years to a range of 4.75% to 5%, after policymakers expressed confidence that inflation will continue to be close to target.
Fed in no rush to cut interest rates
Fed policymakers expect the benchmark interest rate to drop another half percentage point by the end of this year, a full percentage point in 2025, and a final half percentage point drop in 2026, ending up in a range of 2.75% to 3.00%.
Federal Reserve Chairman Jerome Powell has previously said that the committee is in no rush to lower its key benchmark interest rate and that the committee will be more cautious in the way it cuts interest rates.
In addition, earlier, Goldman Sachs analysts also mentioned speech Cleveland Fed President Beth Hammack said resilient growth, a strong labor market and rising inflation justified maintaining modestly restrictive monetary policy for some time because it could help ” Inflation returns to 2% in a timely manner sustainably.”
Impact on cryptocurrencies
Min Jung, a research analyst at Presto Labs, noted: “While a rate cut is undoubtedly positive for Bitcoin prices, the market appears to have already priced in the impact of the 25 basis point rate cut in December.” Therefore, he added, the actual rate cut will have a direct impact on Bitcoin prices. Probably very small.
Jung emphasized that attention will turn to the summary of economic forecasts from the December FOMC meeting and Powell’s comments on future rate cuts. He noted that any unexpected developments or surprises brought about by these factors could become a key driver of Bitcoin’s price action.
The rate cut, which comes just weeks before Trump’s inauguration, could spark a further rally in the cryptocurrency market, especially if the president-elect implements a strategic Bitcoin reserve. Just recently, Bitcoin (BTC) paused after hitting an all-time high of $108,268 as traders awaited optimism from the Federal Reserve’s expected rate cuts and Bitcoin strategic reserve plans. Bitcoin is currently trading at $103,919, down more than 2% in the past 24 hours.
