Key Points
- The US Federal Reserve maintains steady interest rates despite higher than expected inflation, leading to a rally in cryptocurrencies.
- Bitcoin (BTC) and other altcoins surge, with Bitcoin reaching a daily high of $67,781.
Despite the US Consumer Price Index (CPI) inflation data for February surpassing expectations, the Federal Reserve held a dovish stance at the Federal Open Market Committee (FOMC) meeting.
The Federal Reserve chose to keep interest rates steady at 5.25%-5.5% and maintained its forecast of three rate cuts for this year.
Relief Rally in Assets
This decision triggered a significant relief rally in risk-ON assets like equities and cryptocurrencies.
All three major Wall Street indices reached new record highs during Wednesday’s trading session.
Policymakers at the FOMC March meeting projected a decrease in interest rates to 4.6% by the end of 2024, aligning with the median level forecasted in the December outlook.
The decision to proceed with three rate cuts was made despite higher than anticipated Consumer Price Index (CPI) and Producer Price Index (PPI) reports.
Fed Chair’s Statement
Federal Reserve Chair Jerome Powell stated that the strong momentum in the labor market wouldn’t prevent the Fed from reducing interest rates.
Before the FOMC announcement, most market participants expected the first rate cut to happen in June.
Following the announcement, the market’s expectation for at least one rate cut by June rose to 70%, up from over 60%, according to data from the CME FedWatch Tool.
Cryptocurrency Rally
Bitcoin (BTC) surged to a daily high of $67,781, marking a significant recovery of over 10% from earlier levels observed within the same day.
Analysts predict the Bitcoin price rally will continue until the Bitcoin halving in April next month.
Ether (ETH) also rebounded strongly, moving past $3,300 earlier in the day.
This rally occurred despite reports of the Ethereum Foundation facing a confidential inquiry from an undisclosed government entity and speculation about the US Securities and Exchange Commission considering classifying ETH as a security.
Dogecoin (DOGE), Litecoin (LTC), and Bitcoin Cash (BCH) led the gains among major cryptocurrencies.
This uptrend followed the disclosure of a plan by Coinbase to offer futures contracts on these digital assets, which had been posted on a US regulator’s website several weeks prior.
