Key Points
- Bitcoin’s price remained stable after the U.S. Federal Reserve decided to maintain interest rates.
- The economic outlook is uncertain, with the Fed focusing on inflation risks and a possible rate cut.
After the U.S. Federal Reserve decided to keep interest rates at their current level, the price of Bitcoin remained relatively stable.
The Federal Open Market Committee (FOMC) made the decision that most analysts predicted, keeping the benchmark federal funds rate between 5.25% and 5.50%.
The Fed’s Economic Outlook
The central bank stated that recent indicators suggest that economic activity has continued to expand at a solid pace. They noted strong job gains and a low unemployment rate. Inflation has eased over the past year but remains elevated. There has been modest further progress toward the Committee’s 2 percent inflation objective.
On the topic of a potential rate cut, the central bank stated that it aims to achieve maximum employment and inflation at the rate of 2 percent over the long-term. The Committee believes the risks to achieving its employment and inflation goals have moved toward a better balance over the past year. However, the economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.
Stagflation Threat and Its Possible Impact
James Butterfill, the Head of Research at CoinShares, suggests that the Fed is in a precarious situation with the threat of stagflation looming over the macroeconomic environment. This could lead to financial instability and severely impact banks, similar to past crises.
Butterfill expressed concern that the Fed has minimal firepower if inflation rises, potentially causing issues in the banking sector and other areas of the economy. Matt Prusak, CEO of Ionic Digital, believes that any significant Bitcoin drawdowns are likely attractive accumulation opportunities for long-term investors.
The major stock indices remained stable after the Fed’s decision. The S&P 500 gained 1%, the Nasdaq Composite rose 1.7%, and the Dow was up less than 1%. The CBOE Volatility Index (VIX), which measures the expected volatility of the S&P 500 index over the next 30 days, fell 3.5% to 12.40 points. Gold increased 0.5% over the past 24 hours to $2,327.42 per ounce. Bitcoin was trading around $69,159.19 at the time of reporting, up 3.47% over the past day.
