Bitcoin (BTC) reacted to Wednesday’s Federal Open Market Committee (FOMC) meeting, which showed policymakers decided to cut interest rates by 50 basis points (0.5%) for September.
The decision marks the start of an easing cycle, with more rate cuts expected through 2024.
FED cuts interest rates, Bitcoin soars above $61,000
The Federal Reserve cut interest rates by 50 basis points, the first reduction since early 2020. Financial markets, including retail investors in the cryptocurrency sector, had been expecting the move as policymakers aim to control inflation and boost job growth.
The rate cut came after August's CPI showed inflation cooled to 2.5%, down from 2.9% in July. A weaker job market and falling inflation have prompted the Fed to lower borrowing costs, hoping to keep the economy steady.
“I think the rate cuts are going to come faster than we think. Why? Because the labor market and the economy are deteriorating rapidly,”
analyst Michael van de Poppe Chia before the information was released.
Despite the rate cut, the Federal Reserve remains cautious about inflation risks and stands ready to adjust policy as needed to maintain market stability. This decision is significant because it directly impacts the broader economy, affecting families and businesses across the United States.
High interest rates typically make borrowing more expensive, while lower rates make it easier to access loans, boosting spending and investment. This increased cash flow can benefit risk assets like Bitcoin and stocks, which typically rise when borrowing costs fall.
Historically, interest rate cuts have boosted the value of assets like Bitcoin. For example, after the Fed cut interest rates in March 2020, Bitcoin surged as investors sought to take advantage of lower borrowing costs amid the economic uncertainty caused by the pandemic.
According to data from BeInCrypto, BTC is trading at nearly $62,000 at the time of writing.
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