Bitcoin made a notable $500 jump, while Ethereum climbed above $3,400 just before a pivotal interest rate announcement. Expectations were already swirling around a 25 basis point reduction, with JP Morgan’s Michele foreseeing both a rate cut and a dip in inflation. However, the interest rate shift is merely the tip of the iceberg in a broader economic picture.
What Did the Federal Reserve Decide?
As predicted, the Federal Reserve declared a 25 basis point decrement, eagerly awaited by investors who were poised for Powell’s comments shortly after. The economic outlook and future interest rate policies were also unveiled. Followers tuned into COINTURK for Powell’s live address.
How Will Treasury Purchases Unfold?
The Federal Reserve is set to initiate a $40 billion treasury bond purchase within the next month. This plan kicks off on December 12th despite resistance from members Schmid and Goolsbee. Unemployment rates have been revised, predicting 4.5% for 2025 and 4.4% for 2026.
Interest rate projections for the long haul remain at 3.1% by 2028. Some Fed officials foresee a significant reduction, amounting to two quarter-point cuts by 2026. However, several members believe there will be no reduction that year. Meanwhile, unemployment ticked up in September, prompting the Fed to lift operational restrictions on overnight repo activities, signaling enhanced treasury bond purchasing over coming months.
Long-term treasury purchases are anticipated to decelerate considerably. Evaluating both risks and uncertainties, downside risks in employment are on the rise, with inflation holding steady at elevated levels since the year’s start.
The economic climate remains moderately paced with steady expansion, albeit a modest rise in joblessness.
“The policy decision was favored 9-3; Miran supported a half-point reduction, while Goolsbee and Schmid preferred no decrease,” stated the Fed.
Key highlights and projections from the Fed’s recent announcement include:
- Treasury purchases at $40 billion slated for next month.
- Interest rates are projected to be 3.1% by the end of 2028.
- Unemployment predictions are at 4.5% for 2025, slightly improving in subsequent years.
- Inflation remains elevated since the initial part of the year.
Michele of JP Morgan observed hawkish elements in the Fed’s economic outlook noting, “Powell’s upcoming comments could sway market expectations with limited prospects for cuts in 2026.” Powell’s statements will lead the charge in shaping economic sentiment and the future course for cryptocurrencies.
