Key Points
- The Federal Reserve has halted rate cuts, maintaining the federal funds rate at 4.25% to 4.5%.
- Bitcoin’s price remained stable above $102,000, while Ethereum and Solana saw minor dips.
The Federal Reserve has put a pause on rate cuts, keeping the federal funds rate at 4.25% to 4.5%.
This decision follows three consecutive rate reductions and is a departure from last year’s aggressive measures to tackle inflation.
Change in Federal Reserve Policy
The Federal Reserve, while maintaining steady rates, remains open to future adjustments and has adopted a “wait-and-see” approach.
The cryptocurrency market’s response to this news was relatively mild. Bitcoin price remained above $102,000, while Ethereum and Solana experienced slight dips, leading to a 2% decrease in the combined market cap.
This pause in interest rates marks a significant shift in the financial market.
Since September, the Federal Reserve has been gradually reducing rates to control inflation while maintaining economic stability.
However, the Fed has indicated an improving economy with inflation remaining above the 2% benchmark for 45 months.
Compared to rates staying under 3% from 2009 to 2021, the current rates are much higher, indicating a more hawkish outlook combined with a softer borrowing rate aimed at boosting the stock market.
Higher rates make loans more expensive, affecting home mortgages and business loans.
In December, the Fed clarified that it does not anticipate significant rate cuts, with only a minor drop predicted for 2025.
The future of the Fed’s rate remains uncertain due to pressure from various sources, including President Donald Trump, who initially called for an immediate rate cut, advocating for more presidential influence over monetary policy.
Impact on Bitcoin and Cryptocurrencies
The Federal Reserve Chair has significantly changed his earlier stance on Bitcoin and digital currencies.
From initial skepticism about the asset class, the Fed Chair has confirmed that banks may be able to offer their customers crypto services.
Experts interpret this as signaling the end of Operation Chokepoint 2.0, a restriction that has so far affected the crypto industry.
This change also highlights the influence of President Donald Trump’s administration.
With pro-crypto leaders like Scott Bessent as the US Treasury Secretary and Howard Lutnick of the Commerce Department, a comprehensive change is expected at different government levels.
