Fed Makes Third Rate Cut of 2024 Amid Inflation Concerns While Hinting at Slower Future Adjustments
2min read On December 19, 2024, the Federal Reserve announced a 25 basis point cut in the federal funds rate target range to 4.25%-4.50%, aligning with market expectations. This marks the Fed's third rate cut this year, reflecting its efforts to balance inflation pressures with economic growth. During the press conference, Jerome Powell emphasized that while economic activity remains resilient, inflation rates are still above the target level, prompting continued rate cuts to support the economy.
Powell stressed that future monetary policy would be approached with greater caution, hinting at a possible slowdown in the pace of rate cuts. He highlighted the need for the Fed to carefully evaluate subsequent data and changes in the economic outlook to ensure that policy adjustments do not overly impact the economy. Powell also reiterated that the Fed has no intention of holding Bitcoin, clearly stating that under the Federal Reserve Act, the asset range is fixed and no legal changes will be sought.
The announcement prompted an immediate response in the financial markets, with the three major U.S. stock indices falling, the dollar index rising briefly, and spot gold prices dropping. The market consensus suggests that the first phase of this rate-cutting cycle may be nearing its end, and next year's monetary policy will largely depend on the impact of Trump's economic policies on inflation and employment after his inauguration.
Powell mentioned that the Fed could afford to be more cautious with further rate adjustments, especially since the restrictive nature of policy stances has noticeably weakened. If inflation does not consistently fall below 2%, the pace of rate cuts might slow down. Additionally, Powell indicated that the Fed would continue to monitor labor market performance and take further policy actions if needed.
Globally, other central banks have also entered an easing cycle, with 40 rate cuts in the past three months. The impact of the Fed's rate cuts on Bitcoin is complex. Although this rate cut has limited direct impact on BTC, the market is in an adjustment phase after a rapid rally. Analysts have noted that BTC is approaching the end of a triangular consolidation on the 4-hour chart, facing a short-term directional decision.
Powell's remarks also addressed a longer-term economic outlook, noting that current economic performance is generally optimistic, with growth in the second half outpacing expectations and the labor market remaining robust without significant inflationary pressures. However, Powell remains cautious, warning that if inflation fails to fall sustainably below 2%, the pace of rate cuts could decelerate.
The Fed's decision to cut rates was anticipated by markets, but its cautious stance on future monetary policy and focus on inflation has drawn significant attention. Market participants are digesting the reduced dovishness of the Fed and closely watching economic data and policy developments in the coming months.
