Bitcoin Experiences Volatility as US Federal Reserve Maintains High Interest Rates
Summary:
On September 20, Bitcoin (BTC) experienced sudden volatility as the US Federal Reserve decided to keep interest rates at a twenty-year high. The decision led to some noticeable shifts in the Bitcoin market. Jerome Powell, the Fed Chair, hinted that another rate hike could be introduced in 2023, influencing Bitcoin's value. Despite projections indicating a gradual decrease in federal funds' rates over the coming years, the end-of-year figures remain consistent, leading BTC/USD value to hold steady above $27,000.
In a sudden twist of volatility on September 20, Bitcoin's (BTC) value was influenced by the United States Federal Reserve retaining interest rates at an all-time high for the past two decades. BTC price responses were dictated by the decision on the rate, accompanied by comments from Jerome Powell, the Fed Chair. The rate remained consistent with the previous levels which had been determined in July this year, thanks to a decision made by the Federal Open Market Committee (FOMC).
The FOMC's objective is the attainment of maximum employment, paired with inflation rates maintained at 2% over a more extensive period, as highlighted in a press statement. To achieve this, the committee has decided to retain the range for the federal funds rate at 5-1/4 to 5-1/2 percent.
Financial markets had an almost certain expectation of this action, with data indicating there was a 99% chance for the rate hike to stay on hold. Despite this, the language of the Fed remained wary concerning inflation's future, with no assurances of a more relaxed environment. The press statement further outlined the committee's preparedness to modify the monetary policy, if necessary, in the future due to emerging risks that could deter the accomplishment of the committee's objectives.
Founder and CEO of trading firm Eight, Michaël van de Poppe suggested that he expected no further rate hikes in the future and hinted that this could work to Bitcoin's advantage. The BTC price showed apprehension surrounding the decision, with Jerome Powell's commentary at the forthcoming press conference still to be concluded.
Powell insinuated that an additional rate hike could occur in 2023. He pointed out the journey to reduce inflation to the Fed's 2% target still had a significant distance to cover. Powell indicated that if projections aligned with economic developments, the appropriate rate for federal funds by the end of the year should be around 5.6%, decreasing to 5.1% by 2024's end and 3.9% by the end of 2025. While the median projection for the end of the current year remained the same, projections for the next two years saw an increase of 0.5%.
As a result of these developments, BTC/USD continues to remain steady, exceeding $27,000 without a significant deviation from the recent intraday trading range. Nevertheless, every investment carries a level of risk, and it's important that readers undertake adequate research prior to making any financial decisions.
Published At
9/20/2023 6:50:40 PM
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