Bitcoin Surges Beyond $42K as Federal Reserve Maintains Steady Interest Rates

In a widely anticipated move, the U.S. Federal Reserve opted to keep its benchmark fed funds rate range unchanged at 5.25% to 5.5% during the Federal Open Market Committee (FOMC) meeting on Wednesday.

However, in a simultaneous adjustment, the central bank revised its rate outlook for the year-end of 2024, lowering it from 5.1% to 4.6%. In a dovish pivot, The Fed expects to make three rate cuts in 2024.

According to the accompanying statement, the FOMC acknowledged potential challenges, stating, “Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain.”

As the news broke, Bitcoin, gold, and tech stocks experienced an upward surge. Bitcoin has risen to $42,700, a 3.7% increase from yesterday. The positive momentum was attributed to the Federal Reserve’s decision to maintain interest rates at their current levels.

Federal Reserve Chairman Jerome Powell, speaking at a press conference, remarked on the faster-than-expected progress of the U.S. economic recovery. Powell noted that while economic growth forecasts for the year have been revised upwards, overall economic activity still lags behind pre-pandemic levels, and the future trajectory remains uncertain.

Investors had largely anticipated the decision to leave interest rates unchanged. Prior to the announcement, the CME FedWatch tool indicated a 98% probability of the Federal Reserve maintaining the status quo. This tool tracks Fed funds futures contracts, providing insights into investor expectations regarding interest rate changes.

In line with historical trends, cryptocurrency investors interpreted the decision to maintain or lower interest rates as a positive signal for the markets.

Bitcoin has traditionally demonstrated a correlation with risk equities and central bank policies. Favorable credit conditions tend to drive increased investment in risk assets, such as stocks and crypto.

—

—