Fed officials signal gradual rate cuts as inflation eases, impacting the crypto market.
Federal Reserve’s Outlook
In its November meeting minutes, the Federal Reserve indicated that interest rates might be lowered gradually, depending on future economic data. The minutes, released on Tuesday, revealed that Fed officials are optimistic about inflation continuing to decline and expect to adjust monetary policy gradually.
Fed’s Benchmark Lending Rate Reduction
The summary highlighted that if inflation remains on track to reach the 2% target and the economy stays near full employment, it would be appropriate for the Fed to ease its stance over time. The Fed’s benchmark lending rate was already reduced in early November by a quarter percentage point, from 4.75% to 4.50%.
The Fed’s Gradual Approach to Rate Cuts
The Fed’s cautious stance on rate cuts signals that any future adjustments will be slow and methodical. The central bank began reducing rates in September, and it has set its sights on a more neutral policy stance over time, depending on how economic indicators play out. The next meeting of the Federal Open Market Committee (FOMC) is scheduled for December 17-18, where further decisions will be made.
Crypto Market Response
Cryptocurrency markets reacted positively to the Fed’s meeting minutes, with several major crypto assets seeing a rise in value. Bitcoin, for example, bounced back to $93,000 after dipping to a two-day low of $90,742. Other cryptocurrencies followed suit, including XRP, which gained 6%, and Cardano and Stellar, both up by 10%. Aave and Algorand saw an increase of 13%, while Zcash surged by 23%.
Impact of Inflation Data
The release of the Fed’s meeting minutes came just one day ahead of the important inflation data for October, specifically the personal consumption expenditures (PCE) price index. This index is the Fed’s preferred gauge of inflation and heavily influences monetary policy decisions.
Rates for Thanksgiving and the Holidays
With Thanksgiving on the horizon, traders are closely watching the inflation data, anticipating that it may offer further insight into the Fed’s future policy decisions. There is currently a 66% probability that the Fed will lower rates by a quarter point at its December meeting, while 33% of traders believe the rates will remain unchanged.
Disclaimer:
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