The Federal Reserve (Fed) made a significant decision in the financial market by opting to keep interest rates steady at a range between 5.25% and 5.50%, a level not seen in 23 years. This announcement came after a two-day monetary policy meeting, signaling a period of stability since July 2023.
What caught analysts off guard was the change in the expected number of rate cuts for the current year. Initially, there were predictions of three cuts, but the current outlook has been adjusted to only one cut. This adjustment was a close call, highlighting a delicate balance in forecasts: eight Fed officials anticipated two cuts, while seven believed there would only be one. Interestingly, four authorities did not foresee any rate cuts for the year.
Looking ahead to next year, expectations are more positive. Fed officials now project the need for four rate cuts, up from the three initially anticipated in March. This shift reflects an adjustment to future economic conditions that are yet to fully unfold.
Inflation was also a focal point of discussion during the meeting. Projections for 2024 were raised, with inflation expected to reach 2.8% by the end of the year, surpassing the previous forecast of 2.6%. This revision followed an analysis of the primary Personal Consumption Expenditures (PCE) index, a preferred metric for the Fed in assessing this indicator.
It is worth noting the change in language in the Fed’s policy statement, from acknowledging a lack of progress towards the 2% inflation target to now mentioning “modest additional progress.” Despite this adjustment, the statement reiterated the importance of ensuring that inflation is consistently moving towards the 2% target before considering any rate cuts.
At the time of writing, the price of Bitcoin was quoted at US$68,996.29, reflecting a 3% increase in the last 24 hours.
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