In a widely anticipated move, the U.S. Federal Reserve lowered its benchmark interest rate by 25 basis points to a target range of 4.5%-4.75% on Thursday, following the lead of other central banks in easing monetary policy. The decision came amid softening labor market conditions and persistent inflation slightly above the Fed’s 2% target.
Earlier in the day, the Bank of England also cut rates by a quarter point, while Sweden’s Riksbank slashed its key rate by half a percentage point. The coordinated actions signal a growing consensus among policymakers that the global economy may need additional support to navigate the post-pandemic landscape.
Powell Downplays Election Impact
In his first speech since Donald Trump’s decisive election victory, Fed Chair Jerome Powell sought to allay concerns about the potential impact of the incoming administration’s policies on the central bank’s course. “The election results do not affect our policy outlook in the near term,” Powell declared, putting to rest fears of a nasty surprise.
Some observers have speculated that Trump’s proposed mix of tax cuts, tariffs, and deregulation aimed at boosting economic growth could reignite inflationary pressures, prompting the Fed to adopt a more cautious stance. However, Powell made it clear that monetary policy remains restrictive even with today’s easing, though downside risks to economic growth have diminished since the Fed’s 50 basis point cut in September.
No Plans to Resign
Pressed by reporters, Powell also stated unequivocally that he would not resign if asked to do so by Trump, noting that dismissal or demotion “is not permitted by law.” The chair’s resolute stance underscores the Fed’s commitment to maintaining its independence from political influence.
Bitcoin Hits New High
In the wake of Powell’s remarks, the price of Bitcoin (BTC) surged to a record $76,951 before pulling back slightly, still up 1.6% over the past 24 hours. The broader CoinDesk 20 index outperformed, gaining 4.5% over the same period. U.S. stock indexes also hit session highs, with the S&P 500 and tech-heavy Nasdaq rising 0.8% and 1.5% on the day, respectively.
“The Fed’s dovish pivot and Powell’s steadying hand have given Bitcoin a much-needed boost, reinforcing its status as a hedge against monetary policy uncertainty.”
– According to a cryptocurrency market analyst
Data from the CME FedWatch Tool now points to a 28% probability that the Fed will pause its rate hikes at its upcoming December meeting, down from 33% prior to the gathering. The shift in expectations suggests that investors see the central bank taking a more measured approach to tightening in light of the election outcome and mixed economic signals.
Looking Ahead
As the dust settles on the U.S. election and the Fed’s latest move, market participants will be closely watching for any signs of a change in the central bank’s policy trajectory. While Powell has sought to project an air of stability, the evolving political and economic landscape may yet force the Fed’s hand.
For Bitcoin and the broader cryptocurrency market, the Fed’s accommodative stance and the prospect of continued dollar weakness could provide a tailwind heading into the new year. However, regulatory uncertainties and the specter of tighter oversight under a Trump administration may temper some of the optimism.
As always, investors will need to navigate the complex interplay of macroeconomic forces, geopolitical risks, and technological innovation that defines the crypto space. But with Bitcoin once again proving its resilience in the face of market turmoil, the stage may be set for another exciting chapter in the digital asset’s meteoric rise.
