The Federal Reserve left its benchmark interest rate unchanged Wednesday, hitting the pause button on its easing campaign after delivering three interest rate cuts in a row. And Bitcoin appeared to fall sharply at first before spiking to a three-day high.
The decision, which was widely expected among Fed futures traders, kept the federal funds rate at a target range of 4.25% to 4.50%. When the Fed began easing monetary policy in September, its benchmark interest was a full percentage point higher, hovering at a 23-year high.
"That recalibration or policy stance was appropriate in light of the progress on inflation and the rebalancing in the labor market," Fed Chair Jerome Powell said. "We do not need to be in a hurry to adjust our policy stance."
When the Fed started lowering interest rates—a move that typically bodes well for risk assets like stocks and crypto—the U.S. central bank signaled that supporting the labor market through lowering borrowing costs had become a bigger priority than subduing cooling inflation.
At its December meeting, however, policymakers adopted a relatively cautious outlook. Amid signs of strength in the U.S. economy, the Fed signaled that the upside risks to its inflation outlook had increased—alongside a newly-elected wild card in the White House.
Under President Donald Trump, policymakers feared that bringing inflation down to its 2% goal could become more challenging, citing potential shifts in immigration and trade policy. Since then, Trump’s administration has weighed a gradual approach to so-called universal tariffs, according to media reports.
Crypto Giant Coinbase Shakes Up Its Advisory Board, Adds Trump Campaign Manager
Four new members are joining Coinbase’s advisory council to lend their expertise in finance and politics, the crypto exchange said Wednesday—including the co-manager of President Trump's latest winning campaign. William Dudley, a former president of the Federal Reserve Bank of New York, and Chris LaCivita, a political consultant and co-manager of Trump’s 2024 campaign, are joining Coinbase’s global advisory council, the company said in a press release. Kyrsten Sinema, a former Democratic Arizon...
At the Fed’s December meeting, policymakers foresaw just two quarter-percentage-point rate cuts this year, down from the four that they had projected in September.
On Wednesday, the U.S. central bank did not release new economic or monetary policy projections, and the Fed said the “economic outlook is uncertain” in a written statement.
The price of Bitcoin dipped following Wednesday’s decision, falling to $101,400 from around $103,000 in less than half an hour.
But soon after, the price of Bitcoin spiked, currently sitting around $103,800—the highest price since Sunday.
The Fed’s decision to forego rate cuts this month follows pressure from Trump last week. At the World Economic Forum’s annual meeting in Davos, Switzerland, Trump promised to “demand” lower interest rates, per the Associated Press.
Trump Media Launches Fintech Brand With Bitcoin and Crypto Focus
President Donald Trump's media empire is expanding into financial services and could soon buy Bitcoin and other cryptocurrencies. Trump Media and Technology Group, which runs Trump's social media platform, Truth Social, announced Wednesday that it would launch a financial services and fintech arm called Truth.Fi. As part of a diversification strategy, Truth.Fi may buy "Bitcoin and similar cryptocurrencies or crypto-related securities" with $250 million cash that will be custodied by Charles Schw...
Powell declined to comment on what Trump said last week during a press conference, explaining it wouldn't "be appropriate for me to do." He added that he's had no contact with the president since he took office recently.
Inflation has come down significantly since peaking at 9.1% in 2022, but it still clocked in at 2.9% in the 12 months through December, according to a government snapshot released earlier this month. Still, the print helped calm inflation jitters following a blowout jobs report.
As Bitcoin’s price plunged below $90,000 around two weeks ago, some economists believed that the Fed’s easing campaign had ended, pointing to strength in the U.S. economy. Minutes before the Fed’s decision Wednesday, traders foresaw a 28% chance of a rate cut in March, per CME FedWatch.
During Wednesday's press conference, Powell said that an effective federal funds rate of 4.3% was helping the committee achieve its goals. Running above "pretty much everyone on the committee's estimates of the longer run neutral" rate, his description suggested that rate cuts are still on the table if inflation continues to cool.
"I think we see that it's having meaningful effects in bringing inflation under control," he said. "It has helped bring the labor market into balance as well."
The personal consumption expenditures price index, which is the Fed’s preferred inflation gauge, rose 2.4% annually in November. When a refresh is released Friday, the index is expected to show a 2.6% annual increase, according to Trading Economics.
Edited by Andrew Hayward
Editor's note: This story was updated after publication to include further comments from Powell.
