Bitcoin Closes at $80,234.12 After Fed Holds Rates and December Hike Bets Rise

Key Facts

Bitcoin closed at $80,234.12 on October 29, according to EL7 data, after the Federal Reserve kept its target rate range at 3.75% to 4% the previous day. The Federal Open Market Committee statement was approved by a 10-to-2 vote, leaving monetary policy unchanged amid inflation the committee described as still elevated. After the decision, pricing for a December rate hike rose to 86%, according to CME FedWatch, as cited by CoinDesk. The figure was 78% a day earlier and 76% a week earlier, putting expectations for tighter policy at the forefront of market attention. That remains pricing for the next move, while the Fed said the accumulation of more information would help it determine the appropriate policy stance.

The vote revealed divisions within the committee, with Lisa Cook and Beth Hammack dissenting and preferring a quarter-percentage-point increase in the target range at the October meeting. The Fed statement said economic activity was expanding at a "solid pace" and domestic spending had remained resilient. It also described productivity growth as strong and capital investment as robust, while saying uncertainty remained elevated in part because of geopolitical developments. The committee kept inflation among the factors in its assessment and set its goal as returning it to 2% in due course. It said incoming information would help it choose a policy stance consistent with that goal.

Sources differed in their estimates of the probability of a December rate hike, though estimates remained high. CME FedWatch put the probability of a 25-basis-point increase at 86%, up from 78% a day earlier and 76% a week earlier, according to CoinDesk. In a separate report, the Associated Press said investors saw the probability at close to 85% and most economists expected a quarter-point increase at the meeting scheduled for December 8 and 9. The difference reflects two published readings of market expectations, not a change in the committee's official decision. The Fed kept its rate range steady in October, while the December meeting remains the next opportunity to review available data and information.

In the initial reaction after the announcement, Bitcoin rose to $81,000, according to CoinDesk coverage, as the 10-year US Treasury yield climbed four basis points to 5.025%. The two-year yield rose 4.6 basis points to 4.78%, before retreating to 4.73% during the news conference. Investing.com reported that Bitcoin was up 0.6% at $81,336.1 at 17:50 Eastern time on October 28, with an estimated monthly loss of 3.2%. These were intraday readings reported after the decision, while EL7 data recorded a daily close of $81,343.50 on October 28 and then $80,234.12 on October 29. Investing.com also said rising oil prices limited gains in cryptocurrencies.

The backdrop to expectations for tighter policy goes back to what the September meeting minutes recorded about market pricing between meetings. The minutes said investors had priced in a high probability of a 25-basis-point rate increase at the September meeting, and that the shift in expectations was linked in part to Federal Open Market Committee communications and incoming inflation data. In September consumer price data, the headline index rose 0.6% month on month after a 0.4% increase in August, and was up 3.7% year on year. The index excluding food and energy rose 0.3% during the month and 2.6% year on year. Fed Chair Kevin Warsh said energy prices and related costs had risen again in recent weeks, and that the central bank must prevent changes in relative prices in some sectors from spreading more broadly across the economy.

The next milestones include publication of the October meeting minutes on November 18, followed by the Federal Open Market Committee meeting on December 8 and 9, according to the Fed's calendar. The Associated Press said most economists expected a quarter-point increase at the December meeting and investors put the probability of a hike at about 85%. Those expectations follow the October vote, in which two members favored a rate increase while the committee chose to hold the range steady. Warsh had said financial conditions had tightened somewhat since the September decision, according to an Investing.com report. The Associated Press also reported that the US 30-year fixed mortgage rate reached 7.4% earlier in October, its highest level in three years, before edging down slightly.