Bitcoin steady, Altcoins active: Fed rate cut seen as positive for crypto markets. Powell guards future of US economy

[Redator]

Following the Federal Reserve's recent meeting, Bitcoin remained stable, while several altcoins responded with notable gains. Tensions surrounding the key interest rate persist, largely driven by forecasts about the near-term outlook for the US economy.

After the Fed's decision, Bitcoin held its ground and on Thursday, September 18, climbed to $117,300. Meanwhile, other digital assets like Ethereum, Dogecoin, Solana, and XRP showed strong upward momentum. Notably, ETFs based on XRP and Dogecoin sparked avid investor interest in the US.

The Fed's interest rate cut has revived hopes for a new crypto rally, which some analysts believe could be the largest since the bull market of 2021. The crypto monetary landscape has shifted after the central bank finally delivered a long-anticipated 25 basis point cut.

Analysts note that Bitcoin's current confidence stems from its maturing nature, having overcome past volatility. As the world's leading cryptocurrency, it continues to dominate the global market — occasionally pulling back, but more often gaining ground.

Some currency strategists argue that Bitcoin is moving to its own rhythm, while Ethereum — the second-largest crypto by market cap — has picked up the baton, rising 2.5% and breaking above $4,600.

Currently, Bitcoin bulls are active, although bears occasionally push back. Investors are watching the Fed's next moves closely, seeking signals of further rate cuts in the future. If more cuts are expected, demand for high-beta assets like cryptocurrencies could surge — something not seen since the 2021 crypto bull run.

Amid intense macroeconomic shifts and the launch of new digital asset products, the crypto market looks set for a lively finish to September. Investor focus is now on incoming signals from Washington and Wall Street, which could confirm the start of a full-fledged crypto rally.

S&P 500 index expected to rise sharply

Following the Fed meeting, some analysts revised their S&P 500 forecasts upward. Currency strategists at JPMorgan Chase believe the index could rise 15% over the next year to reach 7,600 points.

This week, the S&P 500 traded higher, gaining 0.3% from its all-time high. Analysts see this as a solid foundation for bullish expectations.

"In its history, the Fed has cut interest rates 16 times when the US stock market was within 1% of all-time highs — and each time, the S&P 500 was higher a year later, with an average gain of 15%," JPMorgan Chase noted. If current trends hold, the index could hit 7,600 by 2026.

Confidence also grew in other indices: the Dow Jones Industrial Average added 0.6% following Fed Chair Jerome Powell's press conference, while the S&P 500 and Nasdaq Composite slipped slightly — by 0.1% and 0.3%, respectively.

What Powell said: Fed meeting summary

On Wednesday, September 17, the Fed lowered the federal funds rate by 25 basis points, bringing it to 4.00%–4.25% annually. This decision aligned with most economists' expectations. Jerome Powell described the cut as a "risk-management reduction."

"No one knows what the state of the US economy will be three years from now," Powell said at the post-meeting press conference.

According to the Fed's base scenario, the inflationary impact of tariffs imposed by former President Donald Trump will be short-lived. Powell stated that: "The speed and scale of that impact have already diminished."

He also emphasized that the main tariff burden is now falling not on exporters but on businesses that act as intermediaries between producers and consumers.

The Fed Chair reiterated that the US economy remains resilient, stating: "It has weathered more difficult times, and the risks tied to the Fed's inflation fight are lower than previously estimated."

Still, Powell acknowledged growing downside risks to employment, noting that U.S. unemployment has remained low over the past year.

Updated Fed forecasts: inflation, unemployment, and GDP

Inflation (PCE Index):

• 2025: 3% (unchanged)
• 2026: raised to 2.6% (from 2.4%)
• 2027: remains at 2.1%

Core PCE Inflation:

• 2025: 3.1%
• 2026: 2.6% (up from 2.4%)
• 2027: 2.1% (unchanged)

GDP Growth Forecast:

• 2025: 1.6%
• 2026: raised to 1.8%
• 2027: raised to 1.9%

Unemployment:

• 2025: 4.5% (unchanged)
• 2026: lowered to 4.4% (from 4.5%)
• Interest rate forecast: more cuts expected

The median forecast of the Fed board expects the benchmark interest rate to fall to 3.6% by the end of 2025, implying a total of 50 basis points in cuts. In June, this figure stood at 3.9%.

The updated dot plot (a chart summarizing Fed officials' rate expectations) shows that most policymakers anticipate at least two more rate cuts by the end of 2025. Futures markets are now pricing in a 92% chance of this happening.

This week's rate cut — the first since December 2024 — was largely justified by the softening US labor market. At the same time, the Federal Reserve noted that inflation has risen slightly and remains somewhat elevated.

The material has been provided by InstaForex Company - www.instaforex.com