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Fed Holds Rates Steady, Takes Note of Elevated Inflation
Bitcoin initially fell on hawkish language in the Fed's policy statement, but later recovered.
Updated Jan 29, 2025, 8:17 p.m. Published Jan 29, 2025, 7:05 p.m.
What to know:
- The Federal Reserve kept its benchmark fed funds rate range steady at 4.25%-4.50%, in line with market expectations.
- The accompanying policy statement was hawkish, with the central bank saying inflation remains "somewhat elevated."
- Bitcoin initially declined on the news, but rose as Fed Chair Jerome Powell gave his post-meeting press conference.
As expected, the U.S. Federal Reserve has kept its benchmark fed funds range rate steady at 4.25%-4.50%, the first pause since the central bank began easing policy last September.
The accompanying policy statement noted that the unemployment rate had stabilized at a "low level" and inflation remained "somewhat elevated." The wording was hawkish as it removed last month's reference to "progress" on inflation moving to its 2% target.
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Under pressure for most of this week, the price of bitcoin dipped to $101,800 shortly following the news. U.S. stocks added to the day's losses, with the Nasdaq down 1.1% and the S&P 500 lower by 0.9%. The dollar and gold were little-changed and the 10-year Treasury yield rose 5 basis points to 4.59%.
Since the Fed's first September rate cut, the fed funds rate has been slashed by 100 basis points. The U.S. 10-year Treasury yield, however, has gone in the opposite direction, rising to 4.6% fro 3.6% — a divergence between short-term and long-term rates that rarely has been seen.
That divergence as well as a series of stronger than expected reports on the economy and inflation has not been lost on the Fed. Following the bank's December meeting, Chair Jerome Powell made clear that any further rate cuts — at least for the moment — were on hold.
At his post-meeting press conference, Powell said the change in the policy statement language with respect to inflation was not done to send any sort of message. Both bitcoin and stocks moved off earlier lows following his remarks, with bitcoin rising above $103,000 at the time of the press conference's end.
Update (Jan. 29, 20:13 UTC): Added news from the Powell press conference and updated price action.
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Japan’s Higher Rates Puts Bitcoin in the Crosshairs of a Yen Carry Unwind
A stronger yen typically coincides with de-risking across macro portfolios, and that dynamic could tighten liquidity conditions that recently helped bitcoin rebound from November’s lows.
What to know:
- The Bank of Japan is expected to raise interest rates to 0.75% at its December meeting, the highest since 1995, affecting global markets including cryptocurrencies.
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- Governor Kazuo Ueda indicated a high probability of a rate hike, with officials prepared for further tightening if their economic outlook supports it.
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