The US Federal Reserve's Federal Open Market Committee (FOMC) announced on Wednesday that it would maintain its policy interest rate, with the target range for the federal funds rate remaining at 5-1/4 to 5-1/2 percent. The decision was widely anticipated by market participants, who are now shifting their attention to the central bank's next policy meeting in November.
The Fed also projected higher interest rates for next year, ranging between 4.9%-5.6%, an upward revision from the 4.3% predicted in June. Additionally, the central bank expects stronger economic growth this year, forecasting a 2.1% real GDP increase compared to the 1% forecast made in June.
The decision to hold steady on rates comes amid slowed job gains, though unemployment remains low and inflation continues above target. The FOMC statement highlighted potential challenges from tighter credit conditions for households and businesses, which could impact economic activity, hiring, and inflation. However, the extent of these effects remains uncertain.
Bitcoin’s price showed little change following the Fed's announcement, down just 0.17% on the day. Crypto market analyst TXMC has warned of a potential recession in 2024 due to tight credit conditions, which could influence both stock and Bitcoin prices.
In a recent interview, Marilyn Watson of BlackRock (NYSE:BLK) predicted that the Fed’s target rate would likely remain flat until year-end, with modest rate cuts beginning in late 2024. Similarly, Wharton economist Jeremy Siegel suggested that the stock market might show firm growth until the end of 2023, even without rate cuts.
Analysts have noted a historical correlation between crypto prices and the stock market, particularly in relation to interest rate decisions. Despite this correlation, crypto and macro analyst Noelle Acheson expressed surprise at the 2024 rates projection, which she said was higher than expected. This projection suggests that any rate cuts will likely occur later than the market had anticipated. Fed Chair Jerome Powell is expected to provide more detail on the decision and future outlook in a press conference.
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