Federal Reserve Chairman Jerome Powell and the rest of the committee are convinced of slower economic growth in the coming quarters amid weakening labor market conditions.
For the second consecutive meeting, the US Federal Reserve Committee opted to maintain its previous interest rate increases between 5.25 and 5.50 percent during Wednesday’s highly anticipated FOMC statement. The Chairman of the Federal Reserve, Jerome Powell, highlighted in a Press release That the committee is still debating whether it is necessary to raise the federal funds rate further to contain high inflation. Furthermore, the rapidly changing global economic outlook, driven by the ongoing war in Ukraine, the Middle East crisis in Israel, and the notable growth of the BRICS alliance, has pushed the Federal Reserve to further tighten its monetary policies.
“The bigger picture is that we are making progress on the labor market and inflation, and we are very focused on getting policy tight enough,” Powell said in the news release.
Having raised the federal funds rate month after month in 2022, Powell highlighted that the effects are beginning to be seen with a stable dollar. Furthermore, Powell is convinced that the US banking system is strong and resilient enough after most institutions faced a significant flight to economic security towards what was previously perceived as risky, including bitcoin (btc).
Economic outlook and market impact
With the Federal Reserve committee interested in reducing inflation to 2 percent in the long term, the stock market rallied in the last 24 hours led by the Dow Jones Industrial Average and the S&P 500 index. According to our latest data from the stock market, the S&P 500 traded around 4,237.87 on Thursday, up about 10 percent year to date. On the other hand, the Dow was trading around 33,274.59, up about 0.67 percent over the past 24 hours.
The latest US economic outlook further boosted bitcoin‘s ongoing recovery from the 2022 cryptocurrency bear market. At the time of this report, bitcoin (btc) was trading around $35,240, up more than 112 percent since the calendar turned in January. Additionally, more institutional investors have shown increased demand for digital assets through the bitcoin ETF spot frenzy sparked by BlackRock Inc (NYSE: BLK).
Regarding U.S. domestic product (GDP) growth, the Treasury Department highlighted earlier this week that the pace of growth will likely fall to 0.7 percent during the fourth quarter and 1 percent for the full year. . However, Federal Reserve data shows projected GDP growth of around 1.5 percent in 2024, despite global uncertainties.
“There are risks in both directions,” said Whitney Watson, co-chief investment officer of fixed income and liquidity solutions at Goldman Sachs Asset Management. “Rising inflation expectations, due to rising gas prices, combined with strong economic activity, preserve the prospect of another rate hike. In contrast, a steeper economic slowdown caused by the growing impact of higher interest rates could accelerate the timeline for the transition to rate cuts.”
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