In a move that surprised few market participants, the US Federal Reserve lowered its benchmark federal funds rate by 25 basis points to a range of 4.50%-4.75% on Thursday, following the lead of other major central banks in easing monetary policy. The Bank of England and Sweden’s Riksbank also cut rates by a quarter point and half a point respectively earlier in the day.
However, all eyes were on Fed Chair Jerome Powell as he delivered his first speech since Donald Trump’s decisive victory in the US presidential election. In his remarks, Powell sought to allay concerns that the incoming administration’s proposed policies such as tax cuts, tariffs and deregulation to boost economic growth could reignite inflationary pressures and force the Fed’s hand.
Powell: Trump’s WIN has “No Effect” on Fed Policy
During the press conference, Powell emphasized that the election results have “no effect” on the Fed’s near-term monetary policy stance, though he acknowledged that downside risks to economic growth had diminished since the central bank’s 50 bps rate cut in September. He also flatly rejected the possibility of resigning if asked by Trump, stating it is “not allowed by law” for the president to fire him or demote him.
The Fed chair’s comments appeared to provide a boost to risk assets, with the price of Bitcoin surging past $76,951 to hit a fresh record high before pulling back slightly. It still closed the day up 1.6% over the past 24 hours. The CoinDesk 20 Index, which tracks the broader crypto market, outperformed with a gain of 4.5% over the same period.
Wall Street Cheers Rate Cut, Powell’s Steady Hand
Traditional financial markets also rallied to intraday highs, with the S&P 500 and tech-heavy Nasdaq indexes rising 0.8% and 1.5% respectively on the day. Expectations for a Fed rate pause at its next meeting in December diminished to 28% from 33% prior to the gathering, according to the CME FedWatch tool.
“Powell threaded the needle perfectly, signaling a continued willingness to support the economy while making it crystal clear he won’t be pushed around by politics,”
said a senior market analyst who requested anonymity to discuss internal deliberations.
Key Takeaways from Latest Fed Meeting
- Fed cuts rates by widely expected 25 basis points to 4.50%-4.75% range
- Powell says Trump election WIN has “no effect” on near-term monetary policy
- Bitcoin price hits new all-time high above $76K post-Fed decision
- Broader crypto market rallies, with CoinDesk 20 index gaining 4.5%
- Wall Street ends higher as odds of Fed rate pause in December ease
The latest Fed action marks the fourth straight meeting with a quarter-point rate decrease as the US central bank unwinds last year’s aggressive tightening cycle amid stubbornly elevated inflation and a resilient labor market. In its policy statement, the Federal Open Market Committee noted that “overall labor market conditions have improved modestly” and “inflation retreated but remains a bit high,” while reaffirming its commitment to price stability.
For Bitcoin and the broader cryptocurrency complex, the Fed’s dovish tilt and resulting decline in the US Dollar Index provide a supportive macro backdrop for further gains heading into year-end. Many digital assets are priced in dollars, making them more attractive to international buyers when the greenback depreciates.
Analysts See Room for More Crypto Upside
“The combination of a softer dollar, reduced rate hike expectations and the passing of US election uncertainty is the perfect storm for a bullish Bitcoin breakout,” said a veteran crypto trader. “We could be on the verge of a face-melting Q4 rally.”
Of course, risks remain, including the potential for a hawkish surprise from other major central banks like the European Central Bank which has yet to fully join the rate-cutting party. Regulatory uncertainty in the US and abroad also looms large, with multiple agencies jockeying for oversight of the burgeoning crypto industry.
But for now, crypto bulls are savoring the Fed-fueled gains while keeping a close eye on the macro and political developments that will shape the market’s trajectory into 2024 and beyond. With Bitcoin already reaching new peaks, some wonder if a six-figure price target is in the cards sooner rather than later.
