The Federal Reserve (FED) has just announced a major shift. For the first time since March 2020, the U.S. central bank reduced the interest rate by 50 basis points, bringing it down from 5.5% to 5.0%. While this move was anticipated by many, it still marks a significant moment. By lowering interest rates, the FED hopes to ease borrowing, making everything from mortgages to credit card payments a little cheaper, which could boost the U.S. economy after a long stretch of high rates.
But this wasn’t a unanimous decision. For the first time in two years, FED policymakers didn’t all agree. Fed Governor Michelle Bowman preferred a smaller cut of 25 basis points, making her the only member of the voting group to oppose the majority.
What Happened in the Markets?
With the rate cut now official, the markets reacted quickly and positively. Right after the news broke, the Dow Jones jumped by 303 points (0.7%), the S&P 500 rose 0.7%, and the Nasdaq climbed 0.9%. This surge in stocks reflects the optimism among investors, and it could easily spread into other markets, like Bitcoin.
How Did Bitcoin React?
Bitcoin didn’t sit still. After the FED’s announcement, Bitcoin initially dipped. But as we approached the opening of the Asian markets, Bitcoin turned around, gaining momentum and rising to $62,127 at the time of writing—a 2.5% increase over the last 24 hours.
Now, with lower interest rates, traditional investments like savings accounts and bonds tend to become less attractive. This could push more investors toward higher-risk assets, like Bitcoin. If that happens, we could see even more positive movement in Bitcoin’s price.
On the flip side, there’s another layer to this. The rate cut comes as a reaction to economic weakness. If the broader economy starts showing more signs of trouble, some investors might become more cautious, potentially pulling back from risky assets like Bitcoin and other cryptocurrencies.
What’s Next?
This 50 basis point rate cut might just be the beginning. According to the FED’s median expectations, we could see another half a percentage point reduction before the year ends. This projection comes from the “dot plot,” a summary of economic forecasts also released by the FED.
Looking ahead, there are two more FED meetings this year—one in November, just after the elections, and one in December. These will be key moments to watch as the FED continues to navigate the path forward.
Stay tuned to HowToBuyBitcoin.org for updates as we keep a close eye on how these changes might impact the crypto space.