Fed Maintains Current Rates While Acknowledging Ongoing Inflation Concerns.

Bitcoin Recovers After Initial Drop Following Fed’s Hawkish Stance on Inflation and Rates

Bitcoin briefly dropped in price after the Federal Reserve released its policy statement, signaling a more hawkish stance on inflation, but soon recovered later in the day.

As expected, the U.S. Federal Reserve kept its benchmark fed funds rate unchanged at 4.25%-4.50%, marking the first pause since it began easing its policy in September 2024.

The Fed’s statement pointed out that while the unemployment rate remained at a “low level,” inflation was still “somewhat elevated.” The language struck a more hawkish tone than previous statements, removing the reference to “progress” toward the 2% inflation target, which had been noted in previous communications.

Following the announcement, Bitcoin (BTC) experienced a dip, falling to $101,800, while U.S. stocks also posted losses. The Nasdaq dropped by 1.1%, and the S&P 500 fell by 0.9%. The 10-year Treasury yield climbed by 5 basis points to 4.59%, while both the dollar and gold remained relatively flat.

Since the Fed’s first rate cut in September, the benchmark rate has been lowered by 100 basis points. However, the 10-year Treasury yield has risen sharply, diverging from short-term rates and reaching 4.6% from 3.6%, a rare shift that is being closely watched by market participants.

Fed Chair Jerome Powell made it clear after the December meeting that any further rate cuts were likely on hold for now. During his post-meeting press conference, Powell explained that the change in the language regarding inflation wasn’t intended to send any particular message. Bitcoin and stocks rebounded off their initial lows after Powell’s comments, with Bitcoin moving back above $103,000 by the end of the press conference.