Fed Leaves Rates Steady, Signals Awareness of Elevated Inflation Levels.

Bitcoin Rebounds After Initial Decline Following Fed’s Hawkish Policy Update

Bitcoin initially dropped in response to the Federal Reserve’s policy statement, which hinted at a more hawkish approach to inflation and interest rates, but regained ground as the day progressed.

As anticipated, the Federal Reserve decided to keep its benchmark fed funds rate unchanged at 4.25%-4.50%, marking the first pause since the central bank began easing monetary policy in September 2024.

The Fed’s statement indicated that while unemployment remained “low,” inflation continued to be “somewhat elevated.” The change in language was considered hawkish, as it removed the previous reference to “progress” towards its 2% inflation target, signaling that the central bank is still wary of inflation’s persistence.

Following the announcement, Bitcoin (BTC) briefly fell to $101,800, with U.S. equities also taking a hit—Nasdaq dropping by 1.1% and the S&P 500 down 0.9%. The dollar and gold remained steady, while the 10-year Treasury yield rose by 5 basis points to 4.59%.

Since the Fed’s first rate cut in September, the fed funds rate has been lowered by 100 basis points, but the 10-year Treasury yield has gone in the opposite direction, rising to 4.6% from 3.6%. This divergence between short-term and long-term rates has drawn attention from market observers.

In his post-meeting press conference, Fed Chair Jerome Powell stressed that the revision in the inflation language wasn’t meant to send any specific signal regarding future policy. Bitcoin, along with the stock market, bounced off earlier lows following Powell’s remarks, with Bitcoin recovering to above $103,000 by the time the press conference concluded.