On Wednesday, Jan. 31, 2023, the U.S. Federal Reserve made the decision to maintain the federal funds rate unchanged. The Federal Open Market Committee (FOMC) also stated that the committee "does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation" is steadily approaching the 2% mark. While benchmark equity indices saw declines, the price of bitcoin remained unaffected.
U.S. Central Bank Maintains Federal Funds Rate
The U.S. central bank has resolved to keep the federal funds rate between 5.25% and 5.5% until the next FOMC meeting. The Fed has observed signs of a strong expansion of economic activity. While job growth has slowed compared to the early part of last year, it continues to be strong, and the unemployment rate remains low. Inflation, although moderated over the previous year, is still higher than desired.
"In support of its goals, the committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent," the central bank disclosed on Wednesday. "In considering any adjustments to the target range for the federal funds rate, the committee will carefully assess incoming data, the evolving outlook, and the balance of risks." The Fed further added that it does not expect to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.
Market Performance and Bitcoin
The three primary indices tracking market performance in the United States, namely the Dow Jones Industrial Average, the Standard & Poor's 500, and the Nasdaq Composite, all experienced declines following the announcement. On the other hand, bitcoin (BTC) remained steady, maintaining its value at $43,258 per unit on Wednesday afternoon after the FOMC announcement.
Gold and silver also remained stable in the wake of the Fed's decision on interest rates. While bitcoin and precious metals markets showed no significant movement, the banking sector experienced turbulence. Shares of New York Community Bancorp (NYSB) plummeted over 40% on Wednesday, impacting a broad spectrum of banking stocks.
Fed Chair's Statement and Bitcoin's Price
During the subsequent press conference, Fed Chair Jerome Powell mentioned that the FOMC requires additional data and "greater confidence" regarding the reduction of inflation. This move positions the central bank to potentially reduce the federal funds rate within this year. Powell assured the media that the Fed is fully committed to returning inflation to the 2% goal. He stated, "The lower inflation readings over the second half of last year are welcome, but we will need to see continuing evidence to build confidence that inflation is moving down sustainably to our goal."
By 3:45 p.m. Eastern Time (ET) on Wednesday, bitcoin's (BTC) price dropped 2.1% below the $43K threshold to $42,796 per unit. Powell expressed doubt that the committee will reach a level of confidence by the time of the March meeting to implement rate cuts. The markets reacted with disappointment to Powell's statement, as there is widespread anticipation of rate cuts in March 2024.
What are your thoughts on the Fed's decision to keep rates the same? Share your opinions in the comments section below.
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By: Jamie Redman
Title: Fed Holds Rate Steady, Aiming for ‘Greater Confidence' in Inflation Control
Sourced From: news.bitcoin.com/fed-maintains-interest-rates-seeks-greater-confidence-on-inflation-goal-bitcoin-and-gold-hold-steady/
Published Date: Wed, 31 Jan 2024 20:30:21 +0000