The Fed announced its decision on interest rates yesterday. Bitcoin price responded by… falling.
The Fed is still waiting
There were no surprises. The Fed authorities decided not to lower interest rates in the US. They remain in the range of 5.25-5.5%. However, we learned what the future may bring.
Before I move on to what might happen in September, let me add that the Fed report again includes a near-standard provision:
The Committee does not expect it would be appropriate to lower the federal funds rate range until it becomes more certain that inflation is moving sustainably toward 2 percent.
However, it should not be interpreted as an announcement that the first cut will not take place in September. You have to understand that the central bank authorities cannot say directly what they will do in almost 2 months. After all, they do not know the whole picture that they will find in September.
The key, however, is what Jerome Powell said next. During the press conference, he spoke in the language of “doves.” He admitted that it cannot be ruled out that there will be a cut at the next meeting. However, macroeconomic data, including the level of inflation, will be key.
If this test is met, a cut in our interest rate could be on the table as early as the next meeting in September.
Powell said.
In fact, what we’re seeing now is better than last year. We’ve noticed that a lot of the progress in previous years was in commodity prices, which were falling at an unsustainable pace. That’s a broader disinflation. Commodity prices are falling. We’re also seeing progress in two other big categories, nonresidential services and residential services.
– added.
According to the Fed Watch Tool, the probability of a 25 bp cut on September 18 is 88.5%, and of a 50 bp cut – 11.0%.
Bitcoin price is falling
The cryptocurrency market responded to all of this with declines. Bitcoin is down 2.55% since yesterday, while ether is down 3.3%. 1 BTC is worth around $64,300, while 1 ETH is worth $3,179.
This is a bit surprising, because Powell’s words alone should have filled investors with hope.
However, there are many indications that September will be a turning point. It is possible that the last quarter of this year will even be a period in which bitcoin reaches a new peak.
