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The US central bank FED is cutting key interest rates again – but the crypto market is reacting strangely. Normally, falling interest rates are considered bullish. CoinPro explains why the Bitcoin price is still falling after a speech by Jerome Powell.
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FED Cuts Key Interest Rates to 3.75 to 4.00 Percent
The US central bank FED is cutting key interest rates again – the institution announced this yesterday in a press release. The crucial FOMC committee stated that it aims for an inflation rate of two percent. First, the key interest rates were lowered from 4.00 to 4.25 percent by 0.25 percentage points. The US key interest rates are now at 3.75 to 4.00 percent.
Most recently, the FED had decided on an interest rate cut in September, thereby making it clear that it would follow the course of US President Donald Trump. FED Chairman Jerome Powell had previously rejected the concept of key interest rate cuts – for example, when he met Trump in person in July.
In its latest statement, the central bank again explained that inflation in the US remains at an elevated level. Nevertheless, it intends to cut key interest rates, as it is aware of the risks and continues to monitor the economy’s behavior.
“The committee aims for maximum employment with an inflation rate of two percent in the long term,” the FOMC wrote.
According to Truflation, the inflation rate is already at 2.01 percent. Official US bodies, however, see the inflation rate at three percent. In any case, inflation is progressing more strongly than the FED wants to accept.
To prevent inflation from getting out of control with falling key interest rates, the committee will “continue to carefully assess incoming data, evolving outlooks, and the balance of risks.”
Why Bitcoin’s Price is Falling despite FED Interest Rate Decision
Normally, the crypto market would consider a falling key interest rate as a positive signal. So why is the Bitcoin price falling despite the FED’s interest rate decision? As of press time, BTC is down 2.75 percent in the daily trend. Its market value falls to $109,981. In addition to the successful interest rate cuts in September and October, experts expected a third cut in December.
- Bitcoin
(BTC) - Price $109,621.00
- Market Cap
$2.19 T
The crypto market has apparently already adjusted to this expectation. However, this may no longer happen. In his speech, Jerome Powell struck a rather critical tone.
The FED chairman revealed that there are conflicting opinions within the FOMC. Therefore, it is difficult to reach a consensus. Whether the key interest rates will be lowered again in December therefore remains questionable.
“There were strongly divergent opinions about our further course of action in December. Another reduction of the key interest rate at the December meeting is not a foregone conclusion. Quite the contrary,” Powell explained.
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This part of his speech is likely responsible for the new uncertainty in the market. For crypto, a continuously falling key interest rate is considered rather bullish. After all, the market can then benefit from cheap loans. The increasing devaluation of the US dollar would also be to the advantage of Bitcoin and co.
US Central Bank Ends Quantitative Tightening
In his speech, Powell assured the end of quantitative tightening. The accompanying press release states: “The committee decided to complete the reduction of its total securities holdings in December.”
According to Powell, December 1 is the due date. Crypto entrepreneur Arthur Hayes considers this development a price driver. Crypto could massively benefit from the end of quantitative tightening and a potential shift to quantitative easing.
The reaction of the Japanese central bank also promotes a price rally for Bitcoin. On X, Hayes quoted a statement from the institution as follows:
“Due to increasing uncertainty in the domestic political situation, as well as global economic weakness reflected in the FED’s ongoing interest rate cuts, we deem it best to maintain the policy unchanged to further drive inflation towards our two percent target.”
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Hayes is euphoric, as he expects further inflation of the Japanese Yen. New weakness of the fiat currency will positively affect the crypto market. Hayes even provides an astronomical forecast.
“Translation: Bitcoin rises to 200 million Yen,” Hayes describes the Japanese central bank’s decision in his own words.
Currently, BTC is trading for around 17 million Yen. 200 million Yen would, at the current exchange rate, correspond to approximately 1.3 million US dollars. It is not the first time that Hayes predicts a seven-figure price for Bitcoin.
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