The eyes and ears of the global economic circles and investors in the crypto markets were on the FED members convening today. The institution announced the interest rate decision following the meeting.

The FED kept the interest rates unchanged. This marks the second time during the 15-month interest rate increase period that the interest rates have remained steady. Bitcoin, on the other hand, continued its sideways movement.

In its statement regarding the decision, the FED stated, “Recent indicators show that the economy is growing steadily. Job growth has slowed somewhat in recent months, but inflation remains above the desired level.”

“The U.S. banking system is strong and resilient. Tighter credit conditions for individuals and businesses can affect economic activity, employment, and inflation, but the extent of their impact is uncertain. The Committee closely monitors inflation-related risks,” the statement added.

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Market Reactions and Bitcoin Price Post Powell’s Speech

“We are fully focused on our goals of price stability and full employment. We transitioned from a very tight monetary policy from the last year to this year. In the upcoming period, we will carefully assess and, if necessary, continue the tight policy,” the statement continued.

“Our tightening of employment conditions continues despite some loosening. Our policy to reduce inflation to 2% remains in effect, a goal we have had for a long time. We are aware of the adverse effects of inflation on people,” it added.

“The Committee’s goal is to achieve full employment in the long term and bring inflation to approximately 2%.”

Following the Fed’s interest rate decision, the markets indicate a 70% probability of interest rates remaining unchanged at the November 1, 2023, interest meeting.

After Powell’s speech, the price of Bitcoin is trading around $26,900.

Inflation forecasts by FED officials for the years:

• End of 2023: 3.3%
• End of 2024: 2.5%
• End of 2025: 2.2%

Highlights from Fed Chairman Powell’s Speech:

• “We are ready to increase interest rates further when appropriate.”
• “We may consider another increase in interest rates until we achieve the correct monetary policy.”
• “We are aware of the challenges posed by inflation.”
• “Our current policy stance is restrictive.”
• “We aim to bring inflation to 2% over time with sufficiently restrictive and tightening policies.”
• “We are ready to increase interest rates if deemed necessary.”
• “The decision to keep interest rates unchanged does not mean we have reached the desired policy stance.”
• “A majority of policymakers believe another interest rate hike might be more appropriate.”
• “We need convincing data to reach the end of interest rate hikes.”
• “We are very close to reaching our desired target.”
• “The worst thing we can do is to fail to restore price stability.”
• “The growth has been stronger than expected.”
• “We expect a decline in consumer spending.”
• “If the economy is stronger than expected, the Fed must do more.”
• “We are monitoring short-term movements in energy prices.”

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In recent days, negative effects have been observed in the world markets. The Covid-19 pandemic and the ongoing Russia-Ukraine war create significant problems. These developments indicate that the rate hikes implemented by the US Federal Reserve (FED) for a while will hold another important meeting tomorrow (Wednesday).

As a result of long-standing economic conditions and increasing inflation around the world, the FED, which tightened its monetary policy like many other countries, announced that it would only raise two interest rates until 2024, as the latest inflation data were milder than previous years.

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The FED, which increased by 25 basis points at the meeting held last month, may make another interest rate increase at the meeting tomorrow, despite the more positive inflation data compared to the previous months. According to the FEDwatch data, which measures the interest rate expectation in the markets, the possibility of an interest rate increase seems very high.

Although there are some thoughts that interest rate hikes may pause in the markets as the economic picture is in a more positive mood around the world, the FED points to 2024 for interest rates to stop and start to be lowered in order for the improvement in inflation data and other economic indicators to become permanent. Looking at the previous statements, the rate hike that may take place tomorrow will be the second rate hike after the “last 2 increases can be made” statement.

After the meeting to be held tomorrow, the FED will take the next rate decision at the meeting to be held in late September. The economic data to come until this meeting is of great importance for stopping the rate hikes. If the fall in inflation continues, tomorrow’s decision may be the last rate hike.

For this reason, the announcement of the interest rate decision and the speech that President Powell will make afterward is very important. During these hours, there may be moving moments in crypto markets and Bitcoin according to the course of the statements. That’s why investors should be careful.

Finally, if we take the latest developments in the world as a basis, especially the possibility of Russia’s termination of the grain agreement to be reflected in grain prices and thus food prices, and due to increased military activity at the global level, interest rate cuts may be delayed, and we may even see a third increase until the end of the year.

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