Cryptocurrencies Rally Following Federal Reserve’s Decision to Maintain Interest Rates
Bitcoin and Ethereum experience positive momentum amid Federal Reserve’s announcement.
In response to the Federal Reserve’s announcement that interest rates would remain steady, Bitcoin experienced a surge, registering a 2.7% increase in the last hour.
As of this writing, Bitcoin is priced at $42,556, as per CoinGecko data. Ethereum also reacted favorably to the news, recording a 3.8% increase over the past 24 hours. It is currently trading at $2,281.
The Federal Reserve has maintained the federal funds rate in the range of 5.25% to 5.5%, with a target inflation rate of 2% and the goal of maximum employment. Jerome Powell, the Chairman of the Federal Reserve, acknowledged that the U.S. economy is rebounding quicker than anticipated. However, he also pointed out that the economy has yet to return to its pre-COVID strength, and the future remains uncertain.
The decision to keep the rates unchanged was anticipated by investors. The CME FedWatch tool, which forecasts rate changes, indicated a 98% probability of this outcome.
The Federal Reserve’s decision to keep interest rates low or unchanged is seen as a positive signal. Lower interest rates mean investors can borrow money at a reduced cost, making them more inclined to invest in riskier assets such as stocks and cryptocurrencies.
Historically, when the Federal Reserve reduced rates to 0.25% in March 2020, the value of Bitcoin soared. Conversely, in 2022, when the Federal Reserve increased rates to curb high inflation, the value of stocks and cryptocurrencies, including Bitcoin and Ethereum, took a hit.
In 2022, the Fed took aggressive measures to control inflation, which was at a 40-year high, by raising rates four times by 75 basis points each. This had a negative impact on the value of stocks, equities, and cryptocurrencies.