During the press conference of the Federal Open Market Committee (FOMC) on January 31, the Fed announced that interest rates would remain at 5.25–5.50%, mentioning they would need “a lot of confidence” in addressing inflationary pressures before considering a rate cut.

Just as expected, the Fed kept the interest rate unchanged at 5.25–5.5% for the fourth meeting in a row. They removed the line about “additional policy tightening” from their statement. However, they included a new sentence saying rate cuts would not be appropriate until the committee “has greater confidence that inflation is moving steadily towards 2%”.

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Despite Economic Growth, Lowering the Rate is Impossible

The Fed praised the “robust” economic growth with ongoing job increases and a dip in unemployment as signs of strength. However, the Fed stuck to its warrior stance, declaring that even though inflation has fallen over the past year, it’s still at a level where cutting rates is as inevitable.

Economic prospects are as uncertain, and the committee is still very sensitive to inflation risks.

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Source: Bloomberg

At his press conference, Federal Reserve Chair Jerome Powell went on to explain that, in his view, a rate cut at the next meeting is unlikely. The Fed officials really want to see a continuation of the inflation data we’ve seen lately. Powell mentioned that some positive news on the inflation front might push the timelines a bit, leaving the door slightly ajar for a March rate cut.

When the Federal Reserve decides to cut rates, borrowing money becomes cheaper. This increases overall purchasing activity and encourages riskier behavior in the economy. Reducing interest rates is considered bullish for risky assets, such as cryptocurrencies and tech stocks.

How Will This Affect Bitcoin?

Bitcoin fell on January 31st after the U.S. Federal Reserve determined to keep interest rates unchanged. This move dashed hopes of a potential rate cut in March, prompting one analyst to predict upcoming issues for both U.S. stocks and Bitcoin. 

IG Markets analyst Tony Sycamore told Cointelegraph that the hawkish vibes from the Federal Reserve might spell trouble for U.S. stocks and risky assets, including Bitcoin.

If tomorrow’s earnings reports from Apple, Amazon, and Meta don’t shoot the lights out, expect a further pullback in U.S. stocks in the upcoming sessions. It will put pressure on other risk assets, including Bitcoin.

IG Markets analyst, Tony Sycamore

Bitcoin price dropped just over 2.2% post the FOMC declaration and is currently landing at $42,590. However, despite this ride, TradingView data insists it still managed to pull off a weekly growth of 7%.

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Source: Cointelegraph

Sycamore said that Bitcoin will likely continue to trade lower due to worsening risk sentiment caused by the Fed’s aggressive policies.

The FOMC meeting this morning left those hoping for a Federal Reserve rate cut in March and added to the flood of risk aversion fueled by yesterday’s earnings miss from Microsoft, Alphabet, and AMD.

Sycamore added, suggesting investors can expect gains to around $45,000, before detouring back into the mid-$30,000 territory. Following this, Sycamore wrapped up by predicting the comeback of Bitcoin’s overall upward trend.

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