Bitcoin holds steady after Fed cites 'modest' progress toward 2% inflation objective
Bitcoin's price held relatively steady after the U.S. Federal Reserve kept interest rates at their current level on Wednesday.
The Federal Open Market Committee (FOMC) did what the majority of analysts predicted and held the benchmark federal funds rate in the current range of between 5.25% and 5.50%.
"Recent indicators suggest that economic activity has continued to expand at a solid pace," the central bank said in a statement. "Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. In recent months, there has been modest further progress toward the Committee's 2 percent inflation objective."
Regarding the possibility of a rate cut, the central bank said it "seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks."
Fed's limited options amid stagflation threat
According to CoinShares Head of Research James Butterfill, the Fed is in a precarious situation with stagflation looming over the macroeconomic environment. This could lead to financial instability and severely impact banks, similar to past crises.
"It is worth considering that the Fed now have very little firepower if inflation rises, potentially breaking the banking sector again and cause problems in other areas of the economy at a time when it is already in a weakened state," Butterfill told The Block.
"As the Fed attempts to engineer a soft landing, any material bitcoin drawdowns are likely attractive accumulation opportunities for long-term investors," Ionic Digital CEO Matt Prusak told The Block.
