In a significant move for the financial sector, the Federal Reserve (Fed) has decided to keep interest rates steady between 5.25% and 5.50%, a level unseen for 23 years. This decision emerged after a two-day monetary policy meeting, signaling a period of stability since July 2023.
Analysts were taken aback by the adjustment in the expected number of rate cuts for this year. Initially, forecasts pointed to three cuts, but the current outlook has shifted to just one cut. This fine-tuned adjustment unveiled a delicate balance in forecasts: eight Fed officials anticipated two cuts, while seven saw the potential for only one. Interestingly, four authorities do not foresee any rate cuts for the remainder of this year.
Looking forward to next year, expectations are more positive. Fed officials now predict the need for four rate cuts, up from the three previously anticipated in March. This alteration reflects an adjustment to future economic conditions that have yet to fully materialize.
Inflation was also a key focus during the meeting. Projections for 2024 were elevated, with inflation expected to close the year at 2.8%, surpassing the prior forecast of 2.6%. This revision followed an analysis of the primary Personal Price Expenditures (PCE) index, a favored gauge of inflation for the Fed.
Of note is the shift in language within the Fed’s policy statement, moving from a lack of progress towards the 2% inflation target to “modest additional progress.” Despite this change, the statement reiterated the necessity for confirmation that inflation is consistently moving towards the 2% target before any rate cuts are contemplated.
At the time of reporting, the price of BTC stood at US$68,996.29, reflecting a 3% increase in the past 24 hours.
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