The Federal Reserve raised its key interest rate for the first time in 2023, while Bitcoin experienced a slight gain in response.
On September 16, the U.S. Federal Reserve (Fed) raised its key interest rate by 25 basis points, now set between 3.75% and 4% annually.
This decision was unanimously approved by the Federal Open Market Committee (FOMC) and aligns with market predictions. In contrast to the June meeting, where only three members favored a rate increase, the current vote reflects a unified stance.
This adjustment marks the Fed's first policy tightening since July, when the rate was similarly raised to a range of 5.25%-5.5% under the leadership of Jerome Powell.
Current Fed Chair Kevin Warsh emphasized a cautious outlook, noting that while the economy shows signs of improvement, financial conditions are still not strong enough. He reiterated the Fed's commitment to achieving a 2% inflation target during the Jackson Hole symposium in August.
The FOMC's statement pointed to increased economic activity, enhanced labor productivity, and low unemployment, while also acknowledging concerns over geopolitical uncertainties and rising prices.
“Inflation remains high. Today's policy measures will contribute to a more timely return to the Committee's 2% target,” the FOMC stated.
The U.S. Bureau of Labor Statistics reported that annual inflation remained steady at 3.4% in August, with the core Consumer Price Index (CPI) rising by 0.3% month-over-month, exceeding the anticipated 0.2%. Year-over-year growth in core CPI slowed slightly from 2.5% to 2.4%.
Looking ahead, 16 of the 18 Fed participants expect another rate hike by year's end.
Following the Fed's announcement, Bitcoin saw a modest increase of 1%, stabilizing above $76,000. The broader market also reacted positively, with total capitalization rising by about 1% according to CoinGecko.
However, a setback on October 15 concerning procedural voting on the CLARITY Act resulted in nearly a 2% drop in Bitcoin's value.
