The Federal Reserve has cut interest rates for the first time since March 2020. The move signals the bank is shifting from fighting inflation to supporting the economy amid signs of an economic slowdown, weakness in the labor market and other risks to growth.
Quick Response in Markets
Following the decision, the Dow Jones and S&P 500 indexes experienced volatility. The Dow Jones was up 100 points at the time of writing, up about 400 points. The S&P 500 rose 29 points, while the Nasdaq index rose 153 points.
Bitcoin $60,073 BTC, which rose from $ 59,212 to $ 61,135 in the last 24 hours, is trading at $ 60,849, up 0.6% at the time of writing.
Fed Chairman Powell’s Statements
Speaking at the press conference, Fed Chairman Jerome Powell stated that he believed they were successful in the fight against inflation.
Jerome Powell: “The patient approach we have taken over the past year has paid off. Inflation is now much closer to our goal, and we have gained greater confidence that inflation is moving sustainably toward 2%… This recalibration of our policy stance will help preserve the strength of the economy and the labor market and enable further progress in combating inflation. We are not on a predetermined course. We will continue to make decisions on a meeting-by-meeting basis.”
Powell’s statement shows that the Fed will maintain flexibility in monetary policy and act according to economic indicators. This situation contributed to the reduction of uncertainty in the markets.
Volatility in Cryptocurrency Markets
The interest rate cut also caused movement in cryptocurrency markets. In particular, the increase in value of Bitcoin shows that investors are turning to alternative assets. Experts say that a low interest rate environment will increase interest in cryptocurrencies.
Global economic uncertainties and expansionist policies of central banks are having a positive impact on cryptocurrencies. Bitcoin’s recent rise is seen as a reflection of this trend.
The interest rate cut decision and the Fed’s flexible stance for the future increased market optimism. The positive movements observed in both traditional and crypto markets indicate that investors’ risk appetite has increased. Assets such as Bitcoin may stand out as an attractive alternative for investors during this period. The only problem is that the Fed still uses the expression “reserves are still plentiful” in terms of reducing its balance sheet. This means that monetary expansion has not fully begun.
Disclaimer: The information contained in this article does not contain investment advice. Investors should be aware that cryptocurrencies carry high volatility and therefore risk, and should carry out their transactions in line with their own research.
