Examining the last meeting of the Federal Reserve regarding the trend of interest rate changes in 2024
The Federal Reserve published the minutes of its December meeting yesterday, in which it talks about its outlook on the trend of interest rate changes in 2024. The structure of this statement shows that this rate has probably reached its highest level, but it is possible to increase it in the future if necessary.
Relatively contractionary approach
To Report BINCrypto, the Federal Open Market Committee, which is tasked with setting rates, has agreed to keep its reference rate steady in the range of 5.25% to 5.5%. This means that the interest rate, which has been at this level since July, is at or near its highest level.
In addition, committee members said they expect to see three cuts of 0.25 percentage points by the end of 2024.
In discussing the policy outlook, members saw interest rates as likely to be at or near their peak in the current contractionary cycle, although they noted that the actual path of policy would depend on economic developments.
Federal Reserve officials also pointed to reduced demand and labor market adjustments to lower inflation as a result of past interest rate hikes.
As it stands, inflation has moderated significantly from its peak in 2022, allowing the Fed to stop raising interest rates. According to Trading Economics, the US inflation rate has decreased from 9% in mid-2022 to 3.1%.
Federal Reserve officials added that rates may need to remain at this level for some time. The decision will aim to further reduce inflation, as supply chain improvements have helped so far.
In addition to the contractionary approach, the officials also discussed plans to halt the central bank’s balance sheet reduction.
Effects on the market
US stock markets fell on Wednesday after the release of the latest minutes of the Federal Reserve meeting.
The fall of the digital currency market was even more, of course, other reasons played a role, such as the publication of the rumor of the rejection of Bitcoin spot ETFs by the United States Exchange Commission.
Additionally, high interest rates will make holding cash or bonds more attractive than investing in riskier assets like cryptocurrencies.
The digital currency market also relies heavily on leverage and loans. As rates rise, some speculative investors may face margin calls, which liquefy traders and increase volatility.