The Federal Reserve voted 10 to 2 to maintain borrowing costs, with two officials favoring a quarter point increase as inflation remains elevated.
The Federal Reserve held its benchmark interest rate steady at 3.75% to 4% on Wednesday, voting 10 to 2 to maintain borrowing costs as policymakers weighed resilient economic growth against persistent inflation pressures.
Bitcoin rose modestly following the announcement, attempting to reclaim $81,000 after trading near $80,000 earlier in the session. Traditional financial markets showed a muted reaction, with the S&P 500 edging lower following the decision.
The decision was broadly in line with market expectations. Minutes before the announcement, the CME FedWatch tool showed a roughly 93% probability that the central bank would leave rates unchanged, while 7.2% of traders anticipated a 25 basis point increase.
Federal Open Market Committee members Lisa D. Cook and Beth M. Hammack dissented from the decision, favoring a quarter point rate increase instead.
In its official policy statement, the Fed described economic activity as expanding at a strong pace, supported by resilient domestic spending, robust capital investment and strong productivity growth.
Policymakers also noted that job gains have kept pace with workforce growth and that the unemployment rate has changed little, suggesting that labor market conditions remain relatively stable.
However, the committee reiterated that inflation remains elevated and emphasized its commitment to returning price growth to the central bank’s 2% target.
Bitcoin remains sensitive to Fed policy as investors eye December
Jatin Wahal, Head of Treasury at Xapo Bank, said the widely anticipated decision leaves investors focused on whether the central bank will raise rates again in December.
He noted that Bitcoin has become increasingly sensitive to monetary policy expectations, particularly as elevated Treasury yields offer investors an alternative to riskier assets.
“Bitcoin has become increasingly sensitive to these monetary policy expectations, remaining vulnerable to broader swings in risk appetite as long as Treasury yields stay elevated and government debt competes with speculative assets,” Wahal told Crypto Briefing.
Despite the near term uncertainty, Wahal argued that Bitcoin’s long term investment case remains intact, pointing to consistent accumulation among holders even during periods of market volatility.
“Our data continues to point toward consistent accumulation despite volatility, highlighting that Bitcoin is not simply an asset to trade around market cycles, but one to passively accumulate as a long-term store of value,” he said.
The Fed’s decision follows a quarter point rate increase in September, when policymakers raised borrowing costs to the current 3.75% to 4% range.
Market participants are now looking toward the December meeting for further guidance on whether policymakers believe another increase is necessary to contain inflation.
Fed maintains hawkish stance amid strong economic growth
The latest decision reflects the central bank’s cautious approach as it attempts to balance inflation risks against economic growth and employment conditions.
In Wednesday’s statement, the Fed acknowledged that uncertainty remains elevated, partly because of geopolitical developments, but noted that domestic spending and business investment continue to support economic activity.
The committee also emphasized that additional economic data will help determine the appropriate policy stance to bring inflation back toward its target.
“The Committee will deliver price stability,” the Fed said.
The statement maintains the central bank’s emphasis on inflation even as financial markets remain sensitive to the possibility of additional tightening.
The two dissenting votes in favor of higher rates also highlighted differences among policymakers over whether current borrowing costs are sufficiently restrictive.
