MICA Daily | Fed cuts interest rates by 1 basis point and adjusts next year's interest rate cut expectation to only 2 basis points

The Federal Reserve (Fed) announced today that it will cut its benchmark interest rate by 1 basis point (0.25%) to a range of 4.25%-4.5%. This is the third consecutive rate cut in 2024, despite Inflation remaining at an annual growth rate of 2.7%. Fed Chairman Powell said that this rate cut is aimed at achieving a balance between 'price stability and full employment'. He also added that it is unlikely that interest rates will rise in 2025, but further rate cuts will depend on the progress of Inflation's decline.

The policy statement added the wording of "magnitude" and "timing", implying that the Fed may slow down the pace of rate cuts, and currently Inflation remains a challenge. They expect the core personal consumption expenditure (PCE) inflation rate to drop to 2.5% in 2025, higher than the forecast of 2.2% in September. Economic growth is expected to remain steady at 2.1%, while the unemployment rate may slightly decrease to 4.2%.

Under this assumption, Fed officials' dot plot shows that policymakers generally expect only two 1-yard rate cuts in 2025, down from the four predicted in September, directly indicating that the pace of Fed rate cuts next year will be relatively slow, and also cause a sell-off in risky assets, bitcoin fell 5% after the news, and also hit the price performance of other altcoins, falling between 5% and 10%, and the market funding attitude is expected to re-examine the outlook.

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This article was first published in 'Blockchained' 〈MICA Daily | Fed rate cut by 1 notch, and adjusted next year's rate cut expectations to only 2 notches〉.