The United States Federal Reserve Open Market Committee’s September decision on interest rates was entirely expected, with the FOMC holding rates at the current level of 5.25% to 5.5%. As also expected, the committee indicated there may be another rate hike coming this year, with Chairman Jerome Powell insisting — as usual — in his Sept. 20 press conference that the job of getting inflation back to the Fed’s 2% target is in “no way done.”
What was more of a surprise, however, is the fact that the Fed raised its long-term forecast for the Federal Funds Rate, which they now see as standing at 5.1% by the end of 2024 — up from June’s prediction of 4.6% — before falling to 3.9% at the end of 2025, and 2.9% at the end of 2026. These numbers are notably higher than previous forecasts and indicate a “higher for longer” scenario for U.S. interest rates that not too many market participants were expecting.
As such, we saw markets pull back slightly, with the S&P 500 trading down 0.80% shortly after the announcement, followed by the NASDAQ, which fell 1.28% — a big tumble for these headline indexes. Cryptocurrency markets also responded negatively, with Bitcoin (BTC) falling below $27,000 and Ether (ETH) falling nearly 2% to just more than $1,600 shortly after Powell wrapped up his press conference.
Related: How Bitcoin miners can survive a hostile market — and the 2024 halving
Ultimately, the data shows the U.S. economy is returning to a state we haven’t seen since before the financial crisis of 2008-09, one in which economic growth and inflation remain relatively consistent. A U.S. interest rate averaging around 4% over three years would be no surprise in this old world, nor would annual inflation greater than 2%.
The trouble
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