The Bitcoin price quickly dropped 2% to $65,122, ahead of the monthly close following the Fed’s latest monetary policy meeting. The U.S. Federal Reserve opted to maintain its benchmark fed funds rate at the range of 5.25%-5.50%, aligning with market expectations. However, the Fed provided little indication that a rate cut in September is forthcoming.

Chairman Jerome Powell said, “Inflation has eased over the past year but remains somewhat elevated. The economic outlook is uncertain, and the FOMC is attentive to the risks to both sides of its dual mandate.” Before today’s decision, the market, as per CME FedWatch, had fully priced in a minimum of 25 basis points of rate cuts by the mid-September meeting, with a nearly 60% chance of a cumulative 75 basis points reduction by the end of 2024.

Fed Chair Jerome Powell, in his post-meeting press conference, acknowledged recent data suggesting that inflation is trending towards the 2% target, offering some optimism. However, he emphasized that no concrete decisions regarding rate adjustments in September have been made, though he noted, “the broad sense is that we’re moving closer” to a possible reduction.

The Bitcoin price has slid dramatically in the wake of the latest Federal Reserve meeting. Source Brave New Coin Bitcoin Liquid Index.

This more hawkish stance than anticipated led to a slight increase in bond yields and the dollar, though both metrics closed lower for the day. Meanwhile, Bitcoin’s price has continued to slide to $65,550, while U.S. stocks saw robust gains, with the Nasdaq climbing 2.4% and the S&P 500 up 1.6%.

The Federal Reserve embarked on an aggressive tightening cycle in early 2022, elevating the Fed funds rate from 0% to its current level within less than 18 months amid surging inflation. The rate has been held steady for over a year as the central bank has proceeded cautiously, given inflation’s persistence above its ideal 2% target.

During his post-meeting news conference, Fed Chair Powell highlighted the positive trajectory of recent inflation metrics, which have bolstered the central bank’s confidence. “The second quarter’s inflation readings have added to our confidence, and more good data would further strengthen that confidence,” he stated. He also mentioned that the job market appears to have returned to its pre-pandemic norm, suggesting that any further downturn could prompt action from the Fed.

The Fed’s recent communications suggest a shift in its view on inflation, now seen as less of a threat compared to their June meeting. This adjustment in perspective opens the door for potential rate cuts as early as September, aiming to alleviate the financial strain on U.S. households and businesses.

Powell underscored the complexity of deciding the timing for rate cuts, noting that moving either too soon or too late could have significant implications. He emphasized that the dual challenge of managing inflation and supporting employment remains a delicate balance for the Fed.

Recent economic indicators have provided a mix of signals. The U.S. economy showed remarkable growth in the second quarter, expanding at a 2.8% annualized rate, which was notably above expectations and marked a significant acceleration from the first quarter’s growth. This unexpected robustness in economic performance, coupled with a cooling yet resilient inflation rate, presents a unique scenario for the Fed.

Attention is now squarely on the labor market’s trajectory. The upcoming release of the Labor Department’s July data, which includes payroll growth and the unemployment rate, will be crucial. With the unemployment rate recently rising to 4.1%, the highest in over two years, and other signs of a cooling job market, the Fed remains vigilant.

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