
The US Federal Reserve (Fed) has decided to keep its key interest rates at a high level, marking a significant step in its current monetary policy. This decision immediately influenced the crypto market, with a notable drop in the price of some assets.
Fed stays on course for high rates
The Fed said Wednesday that interest rates would remain between 5.25% and 5.5%, a level not seen since 2001. The move reflects the institution's caution in the face of current economic uncertainties. “Recent indicators suggest that economic activity has continued to grow at a solid pace,” said Fed Chairman Jerome Powell at the news conference. He added that job creation has moderated, with the unemployment rate remaining low.
Inflation, while falling, remains slightly above the Fed's 2% target. Powell noted the progress made toward that goal, but said monetary policy would remain tight until inflation is fully under control. This caution reflects the Fed's desire to stabilize the economy without jeopardizing the progress it has made.
Financial markets are speculating about a possible rate cut at the Fed's next meeting in September. However, Powell insisted that the decision would be made based on upcoming economic data. He said the Fed could consider a rate cut if inflation continues to decline significantly and the labor market remains stable.
Impact on the crypto market
After the Fed’s announcement, the cryptocurrency market quickly reacted with marked volatility. Market leader Bitcoin saw a 3.05% drop, falling below the $64,000 threshold. Currently, the crypto asset is trading below this mark.
Ether, the second-largest crypto by market cap, also saw a decline of around 3% following the announcement. Other altcoins, including assets like Binance Coin (BNB) and Cardano (ADA), also saw notable declines, illustrating a general selling trend in the market.
The long-term implications of the Fed’s decision for the crypto market are complex and nuanced. Traditionally, Fed rate cuts often precede recessions, which could lead investors to pull back from risk assets like bitcoin. However, if the Fed begins cutting rates later in the year, it could signal an economic slowdown, encouraging investors to view crypto assets like bitcoin as a safe haven.
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