Fed Holds Interest Rates for 6th Consecutive Time - Bitcoin Remains "Under Pressure"
Aligning with expectations, the Federal Open Market Committee (FOMC), the decision-making body of the U.S. Federal Reserve, announced early on May 2nd (Vietnam time) its decision to maintain the current interest rates.
Fed Holds Interest Rates for 6th Consecutive Time - Bitcoin Remains "Under Pressure". Image: Coin360
This marks the 6th consecutive time that the Fed has agreed not to adjust interest rates within the reference range of 5.25 - 5.5%, the highest in 23 years. In the policy meetings of June 2023, September 2023, November 2023, December 2023, February 2024, and March 2024, the Fed also decided against rate hikes.
In efforts to control inflation, the U.S. Federal Reserve has raised interest rates 11 times since March 2022. However, the FOMC now acknowledges that the inflation reduction process has stalled in recent months and requires ensuring sustainable cooling of inflation.
Alongside the interest rate information, the Fed also announced further easing measures for the economy by slowing the pace of balance sheet contraction, another tool to guide economic direction. Under the new plan, the Fed will allow $25 billion of government bond maturities per month to expire without reinvestment, down from $60 billion previously.
During the press conference, Fed Chair Jerome Powell projected that the economy and inflation would cool down in the latter half of the year, as pandemic-related savings drawdowns diminish.
Powell affirmed that the current economy is not in a state of stagflation—high inflation coupled with slow growth. The Fed Chair also ruled out the possibility of a rate hike at the next policy meeting in June, emphasizing:
"We need more time to be confident that inflation is nearing our target. I just don't know exactly when that will occur. The Fed is prepared to be patient until inflation dynamics change."
The market entered 2024 anticipating a series of interest rate cuts from the U.S. central bank. However, persistently high inflation has pushed back the timeline for Fed rate cuts.
Industry giants JPMorgan and Goldman Sachs forecast the first rate cut to occur in July. According to the CME FedWatch tool, the market is betting on action from the Fed in November.
After hours of anxious waiting for the news, Bitcoin finally breathed a sigh of relief and rebounded after facing over 4% downward pressure the previous evening. However, the absence of inflows into ETFs continued to weigh on Bitcoin, pushing it down to around $56,552. Compared to its mid-March peak of $73,000, Bitcoin has dropped over 20%.
1-hour chart of BTC/USDT pair on Binance at 08:50 AM on May 2nd, 2024
Approximately $154 million worth of derivative contracts were liquidated in the past 12 hours, with 59% being short positions.
Liquidation data in the past 12 hours, screenshot from CoinGlass at 08:50 AM on May 2nd, 2024
U.S. stocks staged a comeback before market close. The Dow Jones rose by 451 points, the S&P 500 gained 52 points, and the Nasdaq Composite climbed 248 points. Meanwhile, the spot gold price surged over $30 to $2,317 per ounce in the global market.
