The United States Federal Reserve Open Market Committee (FOMC) has ended its Policy Meeting for January, allaying the fears that inflation is still taking a toll on the economy and the need to cut interest rates.. For the first time, the Feds are convinced inflation is no longer a menacing threat, with the “upside risks” arguably slowing down.
Interest Rate Outlook
Following the Policy meeting, one of the key highlights that emanated is the almost unanimous push from officials to lower the Fed Fund Rate by the end of this year. At the moment, the interest rate is pegged in the range of 5.25%-5.50% with the officials refusing to change it, a true sign of abating inflationary pangs.
The United States Federal Reserve started increasing interest rates after the outbreak of the COVID-19 pandemic and the massive run in inflation that trailed it. After months of intensive rate hikes, the Feds started slowing down the increment toward the end of last year in order to assess the impact of previous hikes on the economy.
At the moment, The Fed officials are now looking to reduce the rate in order to release more capital into the US economy. The first rate cut is scheduled for March, 2024.
The revelations made at the FOMC have somewhat triggered a bullish sentiment in the market with crypto-focused publicly listed projects coming off as the biggest beneficiaries. Coinbase Global Inc is up 3.35% with its shares now trading at $134.82 after a $3.99 increment.
Business intelligence and software firm, MicroStrategy Incorporated is also up by 1.59% to $525. These growths mimic related trends among top tech stocks who stand to benefit on any given rate slash.
Bitcoin and Crypto in the Mix
With the planned slash in the interest rate, the crypto market is poised to benefit, but in a very unique way. Notably, the nascent ecosystem turned out to be one of the biggest beneficiaries of the interest rate hike as investors like MicroStrategy turned to Bitcoin to help hedge against inflation and act as a store value as inflation rages on.
With the rate cut, traditional investors will have access to a bigger liquidity flow and they can then become more receptive to injecting cash in Spot Bitcoin Exchange Traded Fund (ETF) products that were greenlighted for trading by the Securities and Exchange Commission (SEC) earlier in January.
For this possible benefit, Bitcoin (BTC) is wriggling away from its short term losses, now jumping by 0.88% in the past 24 hours to $43,610.01. While its resurgence is not solidified yet owing to volatility, it is poised to ultimately offset the selloffs in other crypto assets in the near term.
In the long run, the Fed’s interest rate policy is poised to make a huge difference overall.
