- The Fed kept interest rates at 3.5%-3.75%, with Powell warning that uncertainty persists in the central bank’s economic outlook.
- Despite its “digital gold” status, Bitcoin has stagnated in the $88K range, while physical gold has maintained momentum after hitting an all-time high.
The US Federal Reserve announced a pause in the interest rates at 3.5%-3.75% in the aftermath of the Federal Open Market Committee (FOMC) meeting on Wednesday. Meanwhile, Bitcoin (BTC) has remained between $88K and $89K.
Fed Decides to Keep the Interest Rates
According to the Fed, economic activity is “expanding at a solid pace.” Employment growth has remained low, though there are signs of stabilization. However, it considers inflation “somewhat elevated.”
The Fed decided to maintain the status quo in line with its goal of achieving maximum employment while driving inflation at a sustainable rate of 2% in the long run. The US central bank warned that uncertainty persists in its economic outlook. Hence, it will continue to weigh the risks as it delivers its dual mandate.
Fed Chair Jerome Powell and other voting members of the FOMC, except outgoing Governor Stephen Miran and Governor Christopher Waller, were in favor of the pause. The two dissenting members reiterated their earlier stance of lowering rates, with both proposing a 25-basis-point (bps) cut.
The Fed’s move comes in defiance of US President Donald Trump, who has been pressuring Powell to slash interest rates further. Based on the president’s earlier pronouncements, he was also behind Powell’s criminal probe with the Department of Justice (DoJ) and has strongly urged the Supreme Court to rule on Governor Lisa Cook’s conviction in her mortgage fraud case.
Powell declined to comment on his ongoing criminal probe but emphasized that the central bank must assert its independence to avoid eroding its credibility.
Bitcoin Stalled at $88K
The Fed’s pause in the interest rates should have been a neutral-to-bullish signal. However, it appears to have stalled at $88K after losing the $90K mark over the last 24 hours.
The Fed drama, coupled with Powell’s cautious tone on the economy and other macro events on the sidelines (such as Trump’s new tariff threats, the US dollar’s devaluation, the Greenland controversy, and the looming government shutdown), has likely driven the trend. It’s worth noting, though, that Bitcoin’s correlation to the economic uncertainty lately has been unbecoming of its “digital gold” narrative.
One possible reason is gold’s ongoing momentum, hinting at another break above its all-time high of around $5,600 per fine troy ounce. The bullish investor sentiment toward the precious metal has led to more capital flowing into its ecosystem.
Gold’s market cap has increased by 4.21% or over $1.5 trillion to $38.69 trillion in the last 24 hours, while Bitcoin’s overall valuation pulled back to $1.75 trillion.
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