Bitcoin Falls After Federal Reserve Confirms No Rate Cuts in June

Federal Reserve Maintains Rates Amid Strong Job Growth and Modest Inflation Progress

• The Federal Reserve has stated that it will not lower interest rates just yet, citing good job growth and sustained economic progress. Despite some improvement, inflation remains above the Fed's 2% objective, encouraging the central bank to hold off on rate cuts.
• In its statement, the Federal Reserve stated that they are willing to modify monetary policy if new risks threaten their objectives. This move comes after the US Bureau of Labor Statistics (BLS) released its latest Consumer Price Index (CPI) numbers, which indicated a 3.3% annualized inflation rate in May. According to Reuters, this is a modest decline from the 3.4% reported in April and slightly more than experts expected.
• According to the BLS data, the costs of shelter, medical care, used automobiles and trucks, and education have all increased. In contrast, new vehicle, communication, and recreation costs decreased. Despite these contradictory signals, a lower overall inflation rate signaled that the Fed was approaching its 2% target, perhaps paving the door for future rate cuts—a good sign for stocks and cryptocurrencies, which normally benefit from lower borrowing costs.

Bitcoin’s Price Reaction

• On Wednesday morning, bitcoin rose 3% in response to the May CPI report. However, it fell somewhat following the Fed's no-cuts statement, which was widely expected by the market.
• The Fed restated at its most recent meeting that it does not expect to lower interest rate targets in the foreseeable future. Nonetheless, recent developments in June raised the prospect of a shift. Both the Bank of Canada and the European Central Bank cut their main interest rates by 25 basis points, citing improving inflation expectations.
• In addition, US Senator Elizabeth Warren encouraged Fed Chairman Jerome Powell to decrease interest rates in a letter issued on Tuesday. Warren stated that reduced interest rates would reduce the expenses of renting, owning, and creating housing, relieving many Americans of their single largest monthly expense.
• Despite these challenges, the Fed remains focused on its present economic assessment and is wary of making premature monetary policy changes.