
What You Need to Know:
- The Federal Reserve has decided to keep its benchmark fed funds rate stable at 4.25%-4.50%, which aligns with market predictions.
- The policy statement indicated a hawkish stance, noting that inflation remains somewhat elevated.
- Following the announcement, Bitcoin experienced a brief drop but rebounded as Chair Jerome Powell addressed the press.
As anticipated, the U.S. Federal Reserve maintained its benchmark fed funds rate between 4.25% and 4.50%, marking the first pause since the adjustments began last September.
The policy statement highlighted that the unemployment rate is stable at a low level, while inflation has remained somewhat elevated. It also excluded last month’s reference to progress towards the 2% inflation goal.
Bitcoin’s price dipped to $101,800 shortly after the announcement, with U.S. stocks also declining — the Nasdaq dropping by 1.1% and the S&P 500 by 0.9%. Conversely, the $10-year Treasury yield increased by 5 basis points to 4.59%.
Since the Fed’s initial cut in September, the fed funds rate has been reduced by 100 basis points. Overall, the 10-year Treasury yield rose to 4.6%, reflecting a divergence between short and long-term rates rarely observed before.
This differentiation, along with a series of unexpectedly strong economic reports, has drawn attention from the Fed. After the December meeting, Powell made it clear that additional rate reductions are unlikely at this time.
During his press conference, Powell clarified that the changes in wording concerning inflation were not intended to convey a specific message. Bitcoin and stock prices both recovered after his remarks, pushing Bitcoin above $103,000 by the conclusion of the conference.
Update (Jan. 29, 20:13 UTC): Added commentary from the Powell press conference and adjustments to price proposals.