Fed Holds Rates Steady, Signals Hawkish Stance in March: Impact on Crypto

• U.S. Federal Reserve Keeps Interest Rates Steady
• Fed's Statement on Inflation
• Market Expectations Versus Reality
• Bitcoin's Performance Post Fed Announcement
• Impact on Traditional Markets
• Democratic Senator's Take on Monetary Policy

U.S. Federal Reserve Keeps Interest Rates Steady

On Wednesday, the U.S. Federal Reserve maintained its previous policy, keeping the benchmark fed funds rate range at 5.25%-5.50%. This move may have curbed market expectations for a rate cut at the upcoming March meeting.

Fed's Statement on Inflation

In its policy announcement, the central bank stated, The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.

Market Expectations Versus Reality

Although market observers unanimously anticipated the Fed to maintain status quo, the forecast for the rest of the year seems quite different. Before the recent news, investors had estimated a nearly 65% possibility of at least one 25 basis point rate cut in the Fed's next meeting in March, as per the CME FedWatch Tool. Besides, investors are foreseeing a series of Fed rate cuts throughout 2024. However, post the policy announcement, those March rate cut probabilities were scaled back to slightly above 50%.

Bitcoin's Performance Post Fed Announcement

The price of Bitcoin$42,260 -0.64% did not exhibit much change in the minutes following the Fed's announcement, hovering around $43,500. Though Bitcoin's performance has been inconsistent recently, it has remained roughly steady over the past few weeks. This time span was characterized by the anticipation for the spot ETF approvals and the initial weeks of the ETFs trading. Market optimists anticipate that a series of rate cuts, coupled with demand from new ETFs and the upcoming April halving (where the daily Bitcoin supply will decrease by 50%), could trigger a new upward trend.

Impact on Traditional Markets

Democratic Senator's Take on Monetary Policy

Earlier this week, five Democratic Senators expressed their views on the monetary policy. Sen. Elizabeth Warren (D-Mass) led a group of four, urging Fed Chair Jerome Powell to decrease astronomical rates. Following this, Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee, advocated a similar course of action.

The post-meeting press conference by Powell, where he is likely to address these Senatorial concerns, commences at 2:30 pm ET.

Edited by Jonathan Stoker