Fed Keeps Rates Unchanged, Crypto Surges 3.6%

The Federal Reserve has decided to maintain the target range for the federal funds rate at 4.25% to 4.50%, a move that was widely anticipated by market participants. This decision comes amidst ongoing discussions regarding the government's borrowing limit, which has led to an impasse. In addition to keeping interest rates unchanged, the Fed has announced that it will slow the pace of its balance sheet reduction starting next month. This decision is aimed at releasing liquidity into the market, a move that has been welcomed by investors.

The Fed's decision to keep interest rates unchanged and slow the pace of its balance sheet reduction has had a positive impact on both the U.S. stock market and the crypto market. U.S. stocks rallied following the Fed's announcement, with investors expressing optimism about the potential for rate cuts later this year. This optimism has been fueled by the Fed's indication that it may cut rates in the future, a move that would provide further support to the economy. All three major U.S. stock indexes rose, with the S&P 500 up 1.08%, the Dow up 0.92%, and the Nasdaq up 1.41%. Tech stocks led the gains, with Tesla up 4.68% and Nvidia up 1.81%.

The crypto market has also benefited from the Fed's decision, with Bitcoin surging in response to the easing of financial conditions. The reduction in the pace of the Fed's balance sheet drawdown has led to a shift in global liquidity conditions, fueling risk appetite among investors. This has resulted in a rally in the crypto market, with Bitcoin leading the charge. Bitcoin continued its volatile rally to $87,453 driven by tech stocks, before slightly pulling back to $85,866 at the time of writing, a 3.6% increase in the past 24 hours. Other major cryptocurrencies rose collectively, with Ethereum back above $2000, and XRP surged over 11% as the SEC dropped its appeal against Ripple.

During the press conference, Powell acknowledged that Trump's economic policies have brought a high degree of uncertainty to the U.S. economy but reiterated that the Fed is not in a hurry to adjust its monetary policy. The updated dot plot shows the Fed is expected to cut interest rates twice this year, in line with the forecast from December last year. At the same time, the Fed lowered its economic growth forecast in the latest projections while raising inflation expectations, showing signs of "stagflation."

In the commodities market, the U.S. dollar index surged but quickly narrowed its gain after the Fed announced no change, up 0.21%; U.S. oil rose by 0.39%; the spot gold price hit a new intraday high for the second consecutive day, nearing $3052 during Powell's press conference.

The Fed's decision to slow the pace of its balance sheet reduction is a significant development, as it marks a shift in the central bank's approach to monetary policy. The move is aimed at releasing liquidity into the market, a decision that has been welcomed by investors. The Fed's decision to keep interest rates unchanged and slow the pace of its balance sheet reduction has had a positive impact on both the U.S. stock market and the crypto market, with investors expressing optimism about the potential for rate cuts later this year. This optimism has been fueled by the Fed's indication that it may cut rates in the future, a move that would provide further support to the economy. The rally in the crypto market, led by Bitcoin, is a testament to the impact of the Fed's decision on global liquidity conditions.