- The Fed cuts interest rates by 25 basis points to curb inflation.
- Crypto market continues to decline, with major losses in XRP, SHIB, and DOGE.
- Future rate cuts will require stricter conditions, says Jerome Powell.
The U.S. Federal Reserve recently announced the nation’s new interest rate. On December 18 during the last FOMC meeting of the year— Jerome Powell informed that interests would be slashed by another 25-basis-points.Â
This development marks a significant shift from the state of American interest rates a couple of years prior. In order to control inflation and prevent a recession in the post-COVID economy, the Federal Reserve continuously raised interest rates for nearly 2 years, reaching the biggest mark of the decade.
Now, interests are at a target rate of 4.25% to 4.5%. December’s slash marks the third consecutive interest rate cut. In total, the Fed has cut interests by a whopping 1 full basis point in 2024.
Meanwhile, the crypto market was slow to respond to the news from today’s FOMC meeting. Moments after the announcement, most digital assets continued their intraday downward trend.
XRP, SHIB, and DOGE are among the biggest losers of the day—with decreases of nearly 10% in value during the last 24 hours. Bitcoin is still maintaining its $100k margin at $100,925 despite near 6% losses in that same time frame.
In general, interest rate cuts usually have a large positive impact on digital assets. As borrowing costs decrease—risky assets tend to gain value as investors are able to obtain capital easier. However, the fact that today’s rate cut comes after one of the most profitable rallies in history could mean that the announcement came at a specific time when buyers are exhausted.
Behind this mysterious stagnation could be regarding Jerome Powell’s statement today—in which he claimed that future rate cuts will require a higher bar of acceptance for them to through. The Fed now thinks that the target rate should be at 3% for 2025, which in theory could mean more cuts in the next months, but that would depend on how the economy performs, particularly the Fed’s favorite metrics: core personal consumption expenditures and the overall consumer price index.
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