US Federal Reserve Holds Interest Rates Steady
Crypto markets are experiencing a recovery after a recent dip, and this upward momentum may be attributed to the latest rates outlook from the US Federal Reserve. The December Federal Open Market Committee meeting concluded with no changes to interest rates, but predictions for 2024 were more positive due to falling inflation. The Fed hinted at three rate cuts in 2024, which boosted crypto and US stock markets. However, market expectations of up to six rate cuts in 2024 remain more dovish than the Fed’s own projections.
Fed Chair’s Comments and Market Response
Fed Chair Jerome Powell stated that inflation has eased without a significant increase in unemployment and suggested that the peak rate for this cycle has likely been reached. This change in language indicates policymakers see less need for aggressive tightening. As inflation fell from its peak of 9.1% in June 2022 to just 3.1% in November, Fed officials predict further decreases to 2.4% next year and 2.1% in 2025. Additionally, the central bank forecasts GDP growth of 1.4% and an unemployment rate of 4.1% for next year.
Expectations for the “Santa Claus Rally”
Investors are now anticipating the “Santa Claus Rally,” according to Gina Bolvin, President of Bolvin Wealth Management Group. This positive sentiment extends beyond traditional markets as well; crypto market capitalization has increased by 5% to reach $1.68 trillion at the time of writing. Bitcoin saw a gain of 4.9% on the day and was trading just under $43,000, while Ethereum gained 5.1% to reach $2,272. Altcoins such as Solana, Cardano, Avalanche, and Polkadot also performed well with double-digit gains.
Hot Take: Crypto Markets Rebound Following Fed’s Dovish Pivot
The recent rates outlook from the US Federal Reserve has sparked a recovery in crypto markets. With no changes to interest rates, but positive predictions for 2024, including potential rate cuts, market sentiment has improved. The Fed’s comments on inflation and economic growth have reassured investors, leading to a bounce in crypto market capitalization and price gains for major cryptocurrencies like Bitcoin and Ethereum. This dovish pivot by the Fed may contribute to a bullish trend in the crypto market as we approach the end of the year.
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