Federal Reserve Keeps Interest Rates Unchanged, Anticipates Three Rate Cuts Next Year, US Stocks Rally Together, BTC Approaches 43K
The Federal Reserve announced its interest rate decision in Taiwan early this morning. It has maintained the interest rate at 5.25-5.5% for the third consecutive time, laying the foundation for multiple interest rate cuts in 2024 and beyond. The U.S. stock market rallied, with the Dow Jones Industrial Average surpassing 37,000 points for the first time, reaching a historic high. Bitcoin and Ethereum also temporarily broke free from the correction pattern, with BTC approaching 43K and ETH rising more than 3%.
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Interest rates remain high, economic activity slows but remains strong
Inflation declines, Federal Reserve begins discussing rate cut options
The Federal Reserve has kept the benchmark interest rate at 5.25-5.5%, which is in line with market expectations. The Federal Open Market Committee (FOMC) policy statement stated that recent indicators show that the pace of economic activity growth has slowed from the strong momentum in the third quarter, while employment growth has softened but remains strong compared to earlier this year, and the unemployment rate remains low.
Committee members have raised the annualized growth rate of Gross Domestic Product (GDP) for 2023 to 2.6%, which is half a percentage point higher than the previous update in September. Officials expect GDP to be 1.4% in 2024, which is roughly the same as previous expectations. Unemployment rate forecasts remain largely unchanged, with a rate of 3.8% in 2023 and a subsequent increase to 4.1% in the following years.
Meanwhile, inflation has eased. Federal Reserve officials expect core inflation to decline to 3.2% in 2023, 2.4% in 2024, and then to 2.2% in 2025. Ultimately, it is projected to return to the target level of 2% by 2026.
Federal Reserve Chairman Jerome Powell acknowledged during the post-meeting press conference that the committee discussed the issue of rate cuts. According to the dot plot released this time, committee members expect to cut rates by 3 basis points next year, exceeding previous expectations. Raising rates is no longer the default position for committee members, and the conditions for rate cuts will be the focus of future discussions.
According to the CME FedWatch Index, the market generally expects the Federal Reserve to begin rate cuts in March next year (rising from 43.7% yesterday to 84%), and the rate cut next year may be as high as 6 basis points.
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