TLDR
- The Central Bank makes a calculated decision to lower interest rates by 25 basis points, targeting a range of 4.50%-4.75%.
- Bitcoin price at $76,644.57, up 1% in 24 hours
- RWA tokens are leading the way, boasting an 11% surge as markets react.
- Both S&P 500 and Nasdaq reach unprecedented levels following rate adjustment.
- Powell reassures that election outcomes won't sway the short-term rate strategy.
The Federal Reserve On the 7th of November, 2024, the Fed cut interest rates for the second time in a row. , reducing the prime rate by 25 basis points to rest between 4.50%-4.75%.
The decision , a unanimous move by the Federal Open Market Committee (FOMC), came amidst a backdrop of steady economic growth and shifting market currents.
Following the Fed's announcement, the digital currency sphere showed remarkable stability, with Bitcoin (BTC) maintaining its upward drive. It was priced at $76,644.57, reflecting a 1% rise within the day. Meanwhile, Ethereum (ETH) gained significant traction, climbing 7.4% to a value of $2,888.21.
Solana (SOL) continued to shine, nearing the $200 threshold after marking a 4.6% daily increment. The entire digital currency market saw its capitalization swell by 1.3%, nearing the $2.7 trillion mark, a testament to the robust performance across these assets.
Real-world assets (RWA) tokens made a significant impact, shooting up 11% in the aftermath of the Fed's action. As noted by Artemis, this jump far surpassed the typical market gain of 2.3%, showcasing stellar performance.
Traditional financial avenues also reacted well to the Fed's course of action. The S&P 500 gained 0.9%, while the Nasdaq composite index saw a 1.62% leap, both hitting unprecedented heights. Notably, these increases were already on the horizon before the rate announcement became public.
Fed Chair Jerome Powell shed light on the rationale behind the decision during his press briefing. He noted that although economic activity continues to grow, the future remains clouded with uncertainties. Signs of a less tight labor market are emerging despite unemployment figures being at remarkably low levels.
The Fed is making headway in its inflation control efforts, progressively moving toward the 2% goal, although the present figures still exceed the preferred range. Powell underscored that future rate adjustments will depend on upcoming economic data, outlook shifts, and evaluations of employment and inflation hazards.
The markets had generally foreseen this rate decrease, evidenced by the modest immediate asset class price movements. It's a follow-up to September's more significant half-percentage-point reduction, indicating a cautious stance in updating monetary policy.
Post-announcement, Treasury yields fell noticeably, diverging from their previous day's climb. Interestingly, the mortgage sector isn't reflecting these lower rates, with 30-year mortgages staying firm at 6.8%.
The FOMC’s revised statement hinted at minor tweaks in their economic evaluation. They presently perceive the risks to their employment and inflation targets as being “roughly balanced,” a slight shift from their earlier position of “greater confidence” in the ongoing process.
In reviewing the labor market, the committee acknowledged that “conditions have generally eased,” affirming the economy’s continued solid expansion. Their cautious wording suggests a level-headed perspective on the present economic environment.
Looking down the road, there's anticipation among market observers for the Fed to contemplate another quarter-point trim in December, perhaps pausing in January to gauge the effects of these policy shifts. September’s dot plot had predicted further reductions, totaling a full percentage point by 2025.
Addressing the recent presidential elections, Powell openly stated that the results wouldn’t bear on immediate rate policy decisions. The Fed stands firm on its principle of relying on data-driven decision-making, irrespective of political happenings.
Recently, the Fed's favored inflation measure showed a 2.1% rate over 12 months, while the core inflation, excluding energy and food costs, settled at 2.7%. These statistics continue to guide the central bank's strategy as it aims to hit its target without precipitating economic slowdown.
GDP proved resilient, sustaining a 2.8% growth in the third quarter, albeit slightly trailing the second-quarter's figures. Initial predictions for the fourth quarter hint at ongoing expansion, projected around 2.4%, according to the Atlanta Fed’s forecasts.
