Fed, while stating that rate cuts are not appropriate yet, emphasized the need to wait until more confidence is built that inflation is moving towards the 2% target. Following this decision, Bitcoin (BTC) paused its two-day decline. It was not expected that the US Federal Reserve would change interest rates on May 1st, and indeed they did not.
Fed Keeps Interest Rates Steady
The institution maintained the interest rate between 5.25% and 5.50%, marking its sixth Fed meeting. However, the Fed stated that rate cuts would not be appropriate until more confidence is ensured in inflation moving towards 2%.
As stated in the Fed’s policy statement, the expected progress towards the 2% inflation target has not been achieved in recent months. This situation may require the Fed to adopt a more cautious and possibly longer-term approach in its interest rate policy.
Cautious Stance Continues
During the press conference, Powell mentioned that they did not see the expected progress in the first quarter and therefore reaching the confidence level might take longer. This statement indicates that the Fed may need more data and time before making a decision on rate cuts.
Powell’s statements show that the Fed may continue to adopt a more cautious and patient stance in its interest rate policy. This situation suggests that the “higher rates for longer” approach has officially returned.
Post-Decision Bitcoin and Cryptocurrencies
An hour after the Fed’s interest rate decision was announced, meme coins showed a slight recovery. Bonk (BONK), Floki Inu (FLOKI), and dogwifhat (WIF) gained about 6% in value. During this period, BTC and Ethereum (ETH) exhibited a relatively stable performance.
In the last two days, Bitcoin experienced a sharp decline, dropping from $64,700 to $56,500, a loss of over 12%. This drop carried April’s losses into May and signaled a challenging second quarter. After the Fed’s statements, Bitcoin reclaimed the $58,000 level but soon showed it was still under significant selling pressure. Ethereum also rose slightly, but at the time of writing, it had fallen below the $3000 level.
The Fed’s stance on “higher rates for a longer period” and the negative flows from US Bitcoin ETFs will be quite interesting to see whether Bitcoin can reclaim its low range around $60,800.
