US Fed maintains interest rates
The Federal Open Market Committee (FOMC) has announced that it will keep interest rates unchanged, in line with market expectations. This decision comes after the Consumer Price Index (CPI) rose by 0.3% month over month in December 2023.
Interest rate remains at 5.4%
The Board of Governors of the Federal Reserve System has unanimously voted to maintain the interest rate paid on reserve balances at 5.4 percent, effective February 1, 2024.
Market expects steady rates
The market had already priced in a near 96% chance of the Fed keeping the rates steady, according to the CME FedWatch Tool.
Expectations of rate cuts in 2024
In previous meetings, the Fed had suggested that if inflation reaches the target of 2% and economic expansion slows down, it would consider lowering interest rates. The current expectations are for three rate cuts in 2024. Traders are now eagerly awaiting Fed Chair Jerome Powell’s speech, which will be streamed live on the Fed’s official YouTube channel.
Fed’s decision brings relief
The Fed’s decision to keep interest rates unchanged in its previous meetings provided some relief to the banking industry and sluggish stock market.
Rate hikes since March 2022
The Federal Reserve began aggressively hiking rates in March 2022 and has raised the benchmark interest rate eleven times since then. This has brought interest rates to their highest level in 22 years, within a targeted range of 5.25%–5.5%.
Focusing on Jerome Powell’s speech
In addition to the rate decision, global markets will closely follow Fed Chair Jerome Powell’s press conference. The market will be paying attention to how quickly the Fed plans to initiate a cycle of rate cuts. Powell’s speech is expected to provide insights into the monetary policy and rate-cut plans for the year.
Rate cuts may not immediately impact crypto
Zakhil Suresh, a crypto asset manager and CEO of BitSave, believes that rate cuts are unlikely to happen immediately. He adds that even when rate cuts do occur, it may take a few months before there is a significant impact on high-risk speculative assets like cryptocurrencies.
Hot Take: Fed maintains status quo
The Federal Reserve’s decision to keep interest rates unchanged comes as no surprise to the market. While there were expectations of rate cuts in the future, it remains to be seen how quickly the Fed will implement them. As investors eagerly await Jerome Powell’s speech, it is clear that monetary policy and rate-cut plans will continue to be key factors influencing the crypto market in the coming months.
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