Federal Reserve Keeps Interest Rates, Rate Cut Outlook Steady for This Year

• Bitcoin traded over $64,000 after the Fed's decision.
• It would have been bearish for bitcoin if Fed projected less than three rate cuts, QCP Capital said.

The U.S. Federal Reserve left the interest rates steady at 5.25%-5.5% Wednesday, as expected, and held its projection of three rate cuts for this year, alleviating market concerns it would adopt a more hawkish stance.

Policymakers on the Federal Open Market Committee (FOMC) forecast they would lower interest rates to 4.6% by the end of 2024, according to the March meeting's economic projection, the same median level as their December outlook.

However, the so-called "dot plot" showed only one participant expected more than three cuts this year, compared to five members in December. The dot plot is the Fed committee members' outlook on interest rates over the next year and offers investors a glimpse into policymakers' expectations.

Crypto hedge fund QCP Capital said earlier Wednesday that if the dot plot were to show less cuts for this year instead of three, it would be bearish for bitcoin.

Before the FOMC announcement, most market participants had priced the first rate cut for June. Now, the market puts 70% odds for at least one rate cut by June, up from over 60% earlier, according to CME FedWatch Tool data.

The decision followed hotter-than-expected Consumer Price Index (CPI) and Producer Price Index (PPI) reports, sparking concerns that inflation might accelerate and forcing the U.S. central bank to keep financial conditions tight and delay rate cuts, potentially weighing on asset prices.

"Tighter monetary policies dampen risk appetite in financial markets while lower rates increase the allure of asset classes such as crypto," digital asset management firm 21Shares noted Wednesday.

Bitcoin (BTC) was trading around $64,000 before the meeting from its overnight low of $60,700, then spiked to $64,700 in the immediate aftermath of the decision. The CoinDesk Bitcoin Index (XBX) was up 0.5% over the past 24 hours, while the broad-market CoinDesk 20 Index (CD20) declined over 2% during the same period.