The U.S. Federal Reserve recently made a decision to reduce its benchmark fed funds rate by 25 basis points to 4.5%-4.75%, in line with expectations from the market. This move follows similar actions taken by other central banks to ease monetary policy. The Federal Reserve stated that labor market conditions have somewhat eased, and although the unemployment rate has increased slightly, it still remains low. Inflation has also shown progress towards the Committee’s 2% objective, although it remains slightly elevated.
In addition to the Federal Reserve’s decision, the Bank of England also cut rates by 25 bps, and Sweden’s Riksbank eased key interest rates by half a percentage point on the same day. Fed Chair Jerome Powell, addressing the public after the U.S. elections, assured that the election results will not impact the Fed’s policymaking in the near future. This statement helped alleviate concerns of a potential hawkish surprise.
Some experts had been speculating that the policies proposed by the president-elect, such as tax cuts, tariffs, and deregulation, could lead to increased inflationary pressures. However, Powell noted that the current monetary policy is still considered restrictive, despite the recent rate cut. He also mentioned that the downside risks to economic growth have decreased since the Fed’s previous 50 bps cut in September.
Following Powell’s statements, the price of Bitcoin surged to $76,951, reaching a new record high before experiencing a slight pullback. The CoinDesk 20 Index also performed well, showing a 4.5% gain over the past 24 hours. U.S. stock indexes, including the S&P 500 and Nasdaq, also saw increases throughout the day.
Market expectations regarding the Fed’s upcoming December meeting changed slightly after the recent developments. The CME FedWatch Tool indicated that the likelihood of a rate pause at the December meeting decreased from 33% to 28%.
Overall, the Federal Reserve’s decision to cut rates, coupled with Powell’s reassurance on policy, had a positive impact on various markets, including cryptocurrencies and traditional stocks. The future implications of these actions will continue to be closely monitored by investors and analysts alike.
