Bitcoin posts slight gain after Fed holds rates steady, citing further progress toward 2% inflation target

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 most analysts predicted: It held the benchmark federal funds rate 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 moderated, and the unemployment rate has increased but remains low. Inflation has eased over the past year but remains somewhat elevated. In recent months, there has been some further progress toward the Committee's 2 percent inflation objective."

Regarding the possibility of a rate cut, the central bank said, "the Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent."

"In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities," the FOMC statement added.

All eyes on potential September rate cut

Charles Schwab Managing Director Richard Flynn told The Block that investors expect to see the first rate cut of this year in September.

"We have seen the impact of this certainty in the growing interest in small-cap stocks, which tend to be more highly indebted than large caps, so have been under pressure from the Fed’s hiking campaign and are well placed to benefit from lower interest rates. Today’s report will feel like dé jà vu, but a turning point should be close ahead," Flynn said.

According to the Chicago Mercantile Exchange (CME) FedWatch tool, interest rate traders have increased the chances of a rate cut in September to 89.6%. Recent U.S. economic data, which largely indicates lower price pressures in both the Consumer Price Index (CPI) and service-led inflation, also supports the odds of a rate hike in September.

According to Wintermute analysts, after recent U.S. economic data, "inflation expectations have decreased accordingly, and 1-year inflation swaps currently trade at 1.88%, below the Fed's 2% target."

Equities rally despite Fed decision to keep rates steady