The Federal Reserve kept its benchmark interest rate unchanged after its July policy meeting, driving a short-term rise in crypto assets. Bitcoin briefly rose to approximately $64,400. The market interpreted this decision as the Fed not tightening policy further, but the divided vote also indicated that inflationary pressures have not subsided.
Interest rates remained unchanged at the July meeting.
Following its meeting on July 28-29, the Federal Open Market Committee (FOMC) kept the interest rate range at 3.50% to 3.75%. This marks the fifth consecutive time the rate has remained unchanged.
The vote was 9 to 3. Minneapolis Fed President Kashkari, Dallas Fed President Logan, and Cleveland Fed President Hammark voted against the proposal, with all three advocating for a 25 basis point rate hike.
In its post-meeting statement, the Federal Reserve said that U.S. economic activity continues to expand at a "solid pace," job growth is broadly in line with the size of the labor force, and inflation remains above the 2 percent target. The statement also reiterated the Committee's commitment to restoring price stability.
Rising oil prices fuel inflation concerns
Tensions in the Middle East escalated again around the time of this meeting, pushing oil prices higher. Rising energy prices may be passed on to broader goods and services prices through transportation, fuel, and production costs.
A nearly 10% drop in gasoline prices in June helped curb overall inflation. However, the recent rebound in oil prices has led the market to refocus on whether this trend can be sustained.
Prior to the meeting, several Fed officials had expressed support for keeping interest rates unchanged for the time being. However, Logan had previously stated that inflation had remained above target for too long, and the current environment was more suited to slightly higher interest rates. Hammark also noted that feedback from businesses indicated that measures were still needed to curb price pressures.
Bitcoin and XRP rise after decision
Following the interest rate decision, Bitcoin traded near $64,400. XRP was around $1.08, Ethereum around $1,917.43, and Solana around $73.97.
Market reaction indicated that the Fed did not raise interest rates as expected, providing some support for risk assets. Since higher interest rates typically suppress highly volatile assets, trading in digital assets was generally cautious ahead of the decision announcement.
Meanwhile, the crypto market's Fear & Greed Index stood at 28, remaining in the "fear" zone, an improvement from the previous "extreme fear" level. However, trading sentiment remained conservative following significant disagreements within the Federal Reserve.
US President Trump had called for an interest rate cut before the decision, but the Fed ultimately chose to keep rates unchanged. The market will continue to focus on subsequent inflation data and the Fed's statements regarding the future path of interest rates.
