In a significant development for the financial sector, the Federal Reserve (Fed) has decided to keep interest rates steady at a range of 5.25% to 5.50%, a level not seen in 23 years. This decision was announced at the conclusion of a two-day monetary policy meeting, signaling a period of stability since July 2023.
Analysts were taken aback by the adjustment in the expected number of rate cuts for this year. Initially, there were forecasts of three cuts, but the current outlook has been revised to just one cut. This adjustment was a close call, indicating a delicate balance in the forecasts: eight Fed officials predicted two cuts, while seven believed in the possibility of only one. Interestingly, four authorities do not see any rate cuts happening this year.
Looking ahead to next year, expectations are more positive. Fed officials now anticipate the need for four rate cuts, up from the three cuts projected in March. This shift reflects an adjustment to future economic conditions that are yet to fully materialize.
Inflation was also a focal point of discussion during the meeting. Projections for 2024 were revised upwards, with inflation expected to reach 2.8% by the end of the year, surpassing the previous forecast of 2.6%. This adjustment followed an analysis of the key Personal Price Expenditures (PCE) index, a preferred measure by the Fed for this metric.
It is worth noting the change in language in the Fed’s policy statement, transitioning from a lack of progress towards the 2% inflation target to acknowledging “modest additional progress.” Despite this shift, the statement emphasized the necessity of ensuring that inflation is on a sustainable path towards the 2% target before considering any rate cuts.
As of the time of publication, the price of Bitcoin (BTC) was quoted at US$68,996.29, showing a 3% increase in the last 24 hours.
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