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Prices surged on Wednesday after the Federal Reserve cut interest rates by 50 basis points.
The Federal Open Market Committee (FOMC) cut the benchmark federal funds rate to a lower range of 4.75% to 5.00%, as many economists and traders had expected.
“Recent indicators suggest that economic activity continues to expand at a robust pace. Job gains have slowed and the unemployment rate has risen but remains low. Inflation has moved further toward the Committee’s 2 percent objective but remains somewhat elevated,” the central bank said in a statement. “The Committee has grown increasingly confident that inflation is moving sustainably toward 2 percent and judges that the risks to the achievement of the employment and inflation objectives remain broadly balanced.”
The central bank said of the possibility of further rate cuts, “As it considers further adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities.”
“…the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee stands ready to adjust the stance of monetary policy as appropriate as risks to the achievement of its objectives emerge,” the FOMC statement added.
Federal Reserve Chairman Jerome Powell is scheduled to hold a news conference at 2:30 p.m. ET.
Analysts predict short-term market volatility.
QCP Capital analysts expect today’s decision by the US central bank to have a significant impact on financial markets in the medium to long term. They predict that short-term market volatility will increase after the Fed decides to cut interest rates.
“We expect volatility to be high in the coming days as traders rebalance positions over the coming weeks, and the regime change could signal the start of a strong macroeconomic trend,” QCP Capital analysts said.
While they anticipate short-term volatility and potential price declines, analysts advise investors to focus on long-term opportunities. They recommend focusing on long-term investment strategies that have unlimited upside potential that can capitalize on the significant upside potential of Bitcoin prices.
“While we expect a bearish trend and high volatility, we remain cautious that this does not derail the Bitcoin price uptrend, and prefer long-term structures with unlimited upside potential to capitalize on potential parabolic upside in Bitcoin price,” the analysts added.
Stocks rise after Fed cuts rates
Major stock indexes also surged after the Fed cut rates at its September FOMC meeting. In intraday trading in the U.S. on Wednesday, the S&P 500 rose 0.6%, the Nasdaq Composite rose 0.78%, and the Dow rose 0.5%.
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