As expected, the Fed made a new and third cut of 0.25 points in its main rates, bringing them to a range between 4.25% and 4.50%, in line with market expectations. But the prospects given by the very powerful monetary institution displease investors.
Fed cuts rates by a quarter point, plans two more cuts in 2025
Elle “is getting very close” of the end of its downward cycle, declared the President of the Fed, Jerome Powell, assuring that the Monetary Policy Committee of the institution (FOMC), will show itself “more cautious, regarding possible future rate cuts.” “Inflation has slowed significantly over the last two years but it remains relatively high compared to our long-term objective of 2%”, he recognized, while the institution now forecasts a PCE inflation index of 2.5% at the end of 2025 and a return to 2% for the end of 2026 only.
Thus, the Fed now plans to move more slowly, considering only two rate cuts for 2025, of a quarter of a point each. And “If this were to be the case, the rate gap between the Fed and the European Central Bank should widen once again and penalize (among other things) the euro against the dollar.thinks John Plassard, investment specialist for Mirabaud.
In fact, the euro fell on Wednesday evening at the time of the Fed’s announcements, but recovered around 7:50 a.m. Brussels time, at 1.0386 dollars per euro.
Bitcoin briefly below $100,000
Bitcoin fell below $100,000 on Thursday, before this digital currency recovered somewhat. This drop was caused by the news that the US central bank will cut interest rates less sharply next year, which will weigh on speculative investments.
Following this announcement, bitcoin, the main digital currency, fell to $98,760. At the start of the week, the cryptocurrency was worth another $10,000 more. Other digital currencies have also lost value.
Since Donald Trump’s election victory, the value of bitcoin has increased by approximately 50%. The most famous of cryptocurrencies is based on the promise of the future American president to make the United States “the cryptographic capital of the planet”. He also discussed the creation of a national strategic bitcoin reserve.
The digital currency eventually rebounded from this decline to settle at $101,280.
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