The Fed Maintains Interest Rates, What This Means For Crypto

• The Fed decided to pause the interest rates at the 4.25%-4.50% range.
• Two Republican Fed governors dissented on the FOMC’s decision.
• Fed Chair Jerome Powell’s statement sparked optimism for an eventual cut in September.
• Interest rate cuts usually favor Bitcoin (BTC) and crypto.

The US Federal Reserve announced the result of the Federal Open Market Committee (FOMC) meeting on July 30, right after the White House released its crypto policy report. Despite President Donald Trump’s repeated calls for Fed Chair Jerome Powell to pull the trigger on the interest rate cuts, the country’s central bank has defiantly stood firm on keeping the figures in the 4.25%-4.50% range.

The Fed’s move was within analysts’ expectations. The last interest rate cut happened in December last year, which has remained untouched in the subsequent five FOMC meetings.

Reason Behind the Fed’s Continued Pause on Interest Rates

Powell cited the rising inflation in June as the FOMC’s key consideration in maintaining the status quo. The Fed blamed it all on the uncertainty revolving around Trump’s aggressive tariffs, and it indicated that it wanted to determine the long-term impact of the president’s trade policies first before providing guidance.

ADVERTISEMENTOn the other hand, economists believe that the slowing economy and job market should have been enough reasons for the Fed to cut the rates. Central bank Governors Christopher Waller and Michelle Bowman also aired their dissent on the FOMC’s decision, marking the first time two Fed governors have strongly opposed the committee’s consensus in over three decades.

The Republican governors, rumored to be the potential replacement for Powell once his term expires or he resigns, argued that while Trump’s tariffs will likely push the prices of goods higher in the short run, inflation will eventually stabilize to its previous levels by next year. Waller notably warned his colleagues earlier that they “should not wait until the labor market deteriorates” before cutting the policy rate.

Fed’s Move Fuels Expectations for Rate Cuts in September

On the bright side, Powell noted that the FOMC hadn’t made any decisions about its September meeting, as they have yet to consider a wide range of data before committing to the possibility of an interest rate cut. This ignited economists’ expectations that the Fed may eventually bend to the president’s insistence if the Consumer Price Index (CPI) and Employment Situation report show promising results soon.

ADVERTISEMENT## What This Means for Bitcoin and Crypto

Historically, higher rates favor the US dollar and bonds market. The more enticing returns on these safer and interest-bearing investments often result in investors departing from risk assets like tech stocks, Bitcoin, cryptocurrencies, and other speculative assets in the short term.

In contrast, interest rate cuts generally weaken the US dollar and other traditional fixed-income investments. Their reduced appeal leads to a higher appetite for risk assets, benefiting Bitcoin and altcoins along the way.

Nonetheless, other factors at play may negate these historical trends. Economic factors, technological innovations, regulatory developments, and overall market sentiment could easily subdue the bullish and bearish scenarios surrounding the mentioned assets. Hence, readers should not construe the information presented here as investment advice or promotion of any product.

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