Bitcoin Holds Steady After Fed’s Decision

Bitcoin (BTC) price held relatively steady after the U.S. Federal Reserve maintained interest rates on Wednesday.

The Federal Open Market Committee (FOMC) did as analysts expected, keeping the benchmark federal funds rate between 5.25% and 5.50%.

In their statement, the central bank noted, “Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have moderated, and the unemployment rate has increased but remains low. Inflation has eased over the past year but remains somewhat elevated. There has been further progress toward the Committee’s 2 percent inflation objective.”

On the subject of a potential rate cut, the Fed 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.”

Additionally, the Committee will continue to reduce its holdings of Treasury securities and agency debt and mortgage-backed securities.

All Eyes on Potential September Rate Cut

Richard Flynn, Managing Director at Charles Schwab, told The Block that investors anticipate the first rate cut of the year in September.

Flynn noted, “We have seen the impact of this certainty in the growing interest in small-cap stocks. These stocks, which tend to be more indebted than large caps, have been pressured by the Fed’s hiking campaign and are positioned to benefit from lower interest rates. Today’s report may feel like déjà vu, but a turning point should be close ahead.”

The Chicago Mercantile Exchange (CME) FedWatch tool indicates that interest rate traders have raised the chances of a September rate cut to 89.6%. Recent U.S. economic data shows lower price pressures in both the Consumer Price Index (CPI) and service-led inflation, bolstering the case for a September rate cut.

Wintermute analysts commented that following recent U.S. economic data, “inflation expectations have decreased accordingly, and 1-year inflation swaps currently trade at 1.88%, below the Fed’s 2% target.”

Equities Rally Despite Fed’s Steady Rates

Major stock indices remained steady after the Fed’s decision to hold rates. Mid-day on Wednesday, the S&P 500 was up 1.59% and the Nasdaq Composite increased by 2.49%. The Dow rose 0.71%.

The CBOE Volatility Index (VIX), measuring the expected volatility of the S&P 500 over the next 30 days, dropped 8.9% to 16.11 points. Additionally, gold prices increased by 0.6% over 24 hours, reaching $2,423.9 per ounce.

At the time of publication, Bitcoin was trading around $66,537, reflecting a 1.4% rise over the previous day, according to The Block’s bitcoin price data.