The Federal Reserve opted to maintain its key interest rate amid inflationary pressures. Federal Reserve Chairman Jerome Powell acknowledged the challenges of achieving a 2% inflation target but expressed skepticism about an imminent rate hike. While Powell refrained from disclosing a specific timeline for a rate cut, he emphasized the need for greater confidence in sustainable inflation progress before considering a reduction in the target range.
The news had an immediate impact on the cryptocurrency market, with Bitcoin (BTC) gaining almost 3% after the news was announced. However, it immediately retraced most of the move, with the leading cryptocurrency remaining relatively flat following the FOMC.
The Federal Reserve’s decision comes amidst concerns over persistent inflation. Recent data revealing a stronger-than-expected rise in inflation and wage growth in the first quarter heightened these anxieties. Inflation, although gradually declining from multi-decade highs in 2022, remains above the Federal Reserve’s target of 2% annually. The announcement of a 3.5% inflation rate for the 12 months through March, unchanged from the previous month, immediately unsettled the crypto markets.
The Federal Reserve has maintained its benchmark interest rate within a range of 5.25% to 5.5% since July of the previous year, resulting in the highest rates seen in over 23 years. While the Fed initially projected three quarter-percentage point cuts for 2024, market participants have grown less optimistic, with expectations now pointing to only one or even zero rate cuts by the end of the year. Chairman Powell acknowledged that inflation has not receded as quickly as anticipated, suggesting that rate cuts may still be distant.