The Federal Reserve keeps interest rates unchanged, may cut rates three times next year, US stocks rise together, BTC approaches 43K.
The Federal Reserve announced its interest rate decision in the early hours of today in Taiwan, maintaining the rate at 5.25~5.5% for the third consecutive time, laying the groundwork for multiple rate cuts in 2024 and beyond. The U.S. stock market rallied, with the Dow Jones Industrial Average breaking through 37,000 points for the first time, setting a new historical high. Bitcoin and Ethereum also temporarily broke free from the correction pattern, with BTC approaching 43K and ETH rising by over 3%.
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Interest Rates Maintained at High Levels, Economic Activity Slows but Remains Strong
The Federal Reserve kept the benchmark interest rate unchanged at 5.25-5.5%, in line with market expectations. The Federal Open Market Committee (FOMC) policy statement noted that recent indicators show a slowdown in economic activity from the strong pace seen in the third quarter, with employment growth easing from earlier this year but still strong, and the unemployment rate remaining low.
Committee members raised the annualized GDP growth rate for 2023 to 2.6%, up half a percentage point from the last update in September. Officials expect GDP to be 1.4% in 2024, roughly in line with previous expectations. The unemployment rate forecast remains mostly unchanged, with a rate of 3.8% in 2023, rising to 4.1% in the following years.
Inflation Eases, Fed Begins Discussing Rate Cut Options
Inflationary pressures have eased. Fed officials project that the core inflation rate will decrease to 3.2% in 2023, 2.4% in 2024, and then to 2.2% in 2025. Ultimately, by 2026, it is expected to return to the target level of 2%.
Fed Chair Powell acknowledged in a subdued tone during the post-meeting press conference that the committee had discussed the option of a rate cut. According to the dot plot released this time, committee members anticipate a 3-basis-point rate cut next year, exceeding previous expectations. Rate hikes are no longer the default position for committee members, and the conditions for a rate cut will be the focus of future discussions.
According to the CME FedWatch Index, market expectations for the Fed to begin rate cuts in March next year have risen from 43.7% yesterday to 84%, with the rate cut potentially reaching six basis points next year.
