The Federal Reserve cut its benchmark interest rate by 50 basis points on Wednesday, marking the start of its easing cycle. The Federal Open Market Committee (FOMC) reduced the federal funds rate to a target range of 4.75% to 5.00%, its first rate cut since 2020.
The move was widely anticipated, with CME Group data showing a 61% probability of the decision just before the announcement. The rate cut sent ripples across traditional and cryptocurrency markets, with Bitcoin (BTC) initially dipping to $60,000 before rebounding above $61,000. Currently, BTC is trading at $61,871, up 2.8% in the past 24 hours.
Fed Chair Jerome Powell described the rate cut as a “recalibration” during a post-meeting press conference, stating, “While the economy continues to expand, the upside risks to inflation have diminished, and the downside risks to employment have increased.”
The FOMC statement highlighted progress in reducing inflation, which peaked at 9.1% in 2022 and has since fallen to 2.5% as of August. However, the committee cautioned that inflation “remains somewhat elevated,” signaling that further actions may be necessary.
Looking ahead, the Fed’s “dot plot” projections indicate that policymakers expect the federal funds rate to settle at 4.5% by the end of 2024, a steeper decline than previously forecasted. The outlook for 2025 was also lowered to 3.25%, down from an earlier projection of 4%.
While acknowledging the progress made, Powell tempered optimism, stating, “We’re not saying mission accomplished or anything like that.” He emphasized that more work is needed to achieve sustainable price stability.
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