As a researcher with a background in economics, I closely monitor central bank policies and their impact on financial markets, including Bitcoin. The recent decision by the Federal Reserve to keep its policy interest rate unchanged comes as no surprise to me, given the strong job growth and only modest progress towards the Fed’s 2% inflation target.
On Wednesday, the Federal Reserve made it clear that they would maintain their current interest rate, disregarding mounting political calls for a shift in monetary policy.
No Rate Cuts Yet, Says Federal Reserve
In a recent press statement, the Federal Reserve reported that both employment growth and the economy as a whole have continued to thrive, albeit with a gentle upward trend in inflation approaching the desired 2% mark.
“If risks arise that might hinder the achievement of the Committee’s objectives, the monetary policy stance could be adjusted accordingly.”
As an analyst, I’d rephrase it as: The recently published Consumer Price Index (CPI) inflation data from the U.S. Bureau of Labor Statistics (BLS) reveals a 3.3% yearly price increase in May. This percentage is slightly higher than the 3.4% recorded in April and exceeds economists’ anticipations, based on Reuters reports.
As an analyst, I would rephrase that statement as follows: In my analysis of the data released by the Bureau of Labor Statistics (BLS) on May 25th, I identified several indexes that experienced an increase during the month of May. Specifically, these were shelter, medical care, used cars and trucks, and education. Conversely, costs for new vehicles, communication services, and recreational activities saw a decrease in the same timeframe.
In simpler terms, a decrease in inflation indicates that the Federal Reserve is nearing its 2% inflation goal, implying a higher likelihood of reducing its benchmark interest rate. This scenario is favorable for stocks and cryptocurrencies since lower borrowing costs have historically boosted their growth.
Bitcoin’s Price Reaction
On Wednesday morning, Bitcoin experienced a 3% increase shortly after the release of the May Consumer Price Index (CPI) figures. However, the cryptocurrency subsequently retreated slightly following the Federal Reserve’s anticipated decision to maintain interest rates unchanged.
At its previous gathering, the central bank expressed no immediate plans to lower interest rates, as stated: “We don’t anticipate making adjustments soon.” However, events transpiring in June raised some doubts about the Fed’s stance.
As a crypto investor, I’ve noticed some significant news in the traditional finance sector. The Bank of Canada and the European Central Bank have recently made announcements about adjusting their monetary policies. Specifically, they both decided to reduce their main interest rates by 0.25 percentage points this month. They attributed this move to an “improved inflation outlook,” indicating that they expect inflation to remain within their desired range in the near future.
Additionally, on Tuesday, U.S. Senator Elizabeth Warren penned a missive to Federal Reserve Chairman Jerome Powell advocating for a rate decrease. Her rationale being that such an action would lessen the cost of renting, purchasing, and constructing housing, thereby alleviating Americans’ most substantial monthly expenditure.
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2024-06-12 21:28