Bitcoin prices edged lower after the U.S. Federal Reserve (Fed) kept interest rates unchanged on Wednesday.
The Federal Open Market Committee (FOMC) did what most analysts predicted: it held the federal funds rate steady in the range of 5.25% to 5.5%.
The central bank noted in a statement:
“Recent indicators suggest that economic activity continues to expand at a solid pace. Job gains have been moderate, the unemployment rate has increased but remains low. Inflation has eased over the past year but remains high. In recent months, there has been some additional progress towards the Committee’s 2% inflation target.”
Regarding the possibility of rate cuts, the central bank stated:
“The Committee does not expect it will be appropriate to reduce the target range until it has greater confidence that inflation is sustainably moving down toward 2%.”
The FOMC statement added:
“Additionally, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities.”
All Eyes on Possible Rate Cuts in September
Richard Flynn, managing director at Charles Schwab, said investors expect to see the first rate cut of the year in September.
“We have seen the impact of growing interest in small-cap stocks, which tend to have more debt compared to large-cap stocks, thus they have been under pressure from the Fed’s rate hike campaign and have the opportunity to benefit from lower rates. Yesterday’s report brings a familiar feeling, but a twist is approaching,” Flynn said.
According to the FedWatch tool by the Chicago Mercantile Exchange (CME), traders have increased the likelihood of a rate cut in September to 89.6%. Recent U.S. economic data largely showed lower price pressures in both the Consumer Price Index (CPI) and services inflation, which also supports the possibility of a rate hike in September.
According to analysts at Wintermute, after recent U.S. economic data, “inflation expectations have decreased and the 1-year forward inflation swap rate is now trading at 1.88%, below the Fed’s 2% target.”
Stocks Rise Despite Fed’s Decision to Hold Rates Steady
Major stock indexes remained steady after the Fed kept interest rates unchanged at the June FOMC meeting. During midday trading in the U.S. on Wednesday, the S&P 500 rose 1.59% and the Nasdaq Composite increased by 2.49%. The Dow index was up 0.71%.
The CBOE Volatility Index (VIX), which measures the expected volatility of the S&P 500 over the next 30 days, fell 8.9% to 16.11 points. Gold rose 0.6% in the past 24 hours to $2,423 per ounce.
Bitcoin was trading around $64,496 at the time of writing, down 3% over the past day.
You can see the BTC price here.
