Federal Reserve Cuts Rates by 25 Basis Points amid Economic Easing, BTC Hits Record High

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As an analyst with over two decades of experience in the financial markets, I find this latest move by the Federal Reserve to be a strategic one, albeit not entirely unexpected. The ongoing inflation concerns have been a global issue, and it’s no surprise that central banks around the world are adjusting their monetary policies accordingly.

On Thursday, the Federal Reserve in the United States lowered its interest rate by 0.25 percentage points. Although this move was somewhat expected, it resulted in the interest rate being set within a range of 4.5% to 4.75%, as the central bank continued to work towards boosting economic expansion.

Given the persistent concerns about inflation in the U.S., the action was likely taken out of necessity. This move mirrors decisions made by other international central banks as well. On the same day, both the Bank of England and Sweden’s Riksbank announced rate reductions, suggesting that easing monetary policy is a global trend.

Federal Reserve Signals Confidence Despite Inflation Concerns

In their recent communication, the Federal Reserve admitted that inflation could be showing some signs of moderation and potentially approaching the desired level. This level, which they are keenly monitoring, is the 2% mark set by their committee. In other words, a part of their declaration suggests that inflation might be drawing close to the 2% target they’re aiming for.

Over the course of this year, the overall situation in the job market has become more relaxed, with the unemployment rate gradually increasing, though it still stays relatively low.

Although inflation is steadily moving towards the Federal Reserve’s 2% objective, it still exceeds the mark. Consequently, policy-makers continue to exercise caution.

Currently, Federal Reserve Chair Jerome Powell is trying to calm down concerns about President Trump’s economic proposals. The recently inaugurated president has been quite outspoken about his plans, which involve tax cuts, tariffs, and deregulation. These actions are widely expected to boost inflation, potentially requiring the Fed to adopt more forceful strategies.

In his initial speech following Donald Trump’s recent election win, Powell stated that the outcome of the election would not influence the Federal Reserve’s immediate policy choices. Instead, he implied that their decisions would be based on other factors.

Bitcoin and Stocks Surge

Significantly, the Federal Reserve’s announcement triggered a surge in financial markets, including Bitcoin. This digital currency reached an unprecedented high of $76,951, only to slightly pull back. Consequently, many other parts of the broader market mimicked this trend, with the CoinDesk 20 Index rising by approximately 4.5% for the day.

Following the Federal Reserve’s announcement, US stock markets showed a favorable reaction. For instance, the S&P 500 increased by 0.8% and the Nasdaq saw a 1.5% growth, hitting record highs during the trading session.

Investors interpret the move to lower interest rates as an indication that the Federal Reserve is becoming increasingly optimistic about the economy’s ability to withstand challenges, despite ongoing worries about inflation.

Although the recent interest rate reduction may give the impression of a temporary halt in additional adjustments, the CME FedWatch Tool shows a change in predictions, revealing only a 28% likelihood that the Federal Reserve will maintain rates unchanged at their December meeting, down from a previous 33% probability following Thursday’s announcement.

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2024-11-08 17:51