Recaps · FOMC · 1 Feb 2023, 19:00 UK

One phrase, a four-hour rally

The Fed slowed its hikes again, to a quarter point. The statement still said more increases were coming, and Bitcoin dipped. Then Powell said that "the disinflationary process has started". Stocks and crypto rallied for the rest of the evening.

Decision: Wednesday 1 February 2023, 19:00 UK
Rate: +25bp to 4.50% to 4.75%
Statement: "Ongoing increases" still appropriate (Reuters)
Powell: "The disinflationary process has started" (Fed transcript)
Bitcoin at decision: $23,068

The decision

After 75 and 50 basis point hikes through 2022, the Fed raised rates by 25 basis points. Reuters reported that the statement still pointed to further increases and that Powell suggested a "couple" more hikes. But in the press conference he also said that a disinflationary process had begun, mainly in goods prices, while warning that it was at an early stage (Fed transcript).

A dip, then four hours up

1 19:30 UK: press conference starts, low about 1.3% down
2 22:20 UK: high, about +3.2%

Bitcoin, 5-minute candles, % from the 19:00 UK price. Source: Bitstamp.

Bitcoin was -0.31% after five minutes and fell to about 1.3% down as the press conference started. Then it turned. It was +1.41% at 20:00 UK, #19 of 80 Fed decisions at 3.2 times a normal hour, and kept climbing to about 3.2% up at 22:20 UK. CoinDesk reported that Bitcoin broke through $23,500 while Powell spoke. The Nasdaq-100 ETF was +2.3% at the 21:00 UK close.

Change four hours after the decision, in %.

A phrase that did not hold up

Two days later, the January jobs report showed 517,000 new jobs, a far stronger labour market than expected, and the Fed went on to raise rates three more times in 2023. In our data Bitcoin still held its gains a day later, +4.3%, but was -0.8% after a week. The March 2023 decision, during the banking stress, went the other way: Bitcoin fell 1.8% in the hour and 5.1% by four hours.

The pattern of a dip on the statement and a rally in the press conference also shows the value of waiting. The statement repeated old language about further hikes. The new information came in Powell's answers, half an hour later, and that is where the move came from.

The lesson is that a press conference can move prices more than the statement, and a single phrase can carry the evening. It is worth checking whether the data that follows supports it. Solana gained most here, +8.0% at four hours and +12% after a day.

Sources: release time and figures from the Federal Reserve's statement and target range (FRED DFEDTARU). Crypto: Bitstamp 5-minute candles; SPY/QQQ: IEX. No consensus forecasts are shown because they are proprietary; comparisons are with the previous release. “× normal hour” compares the first-hour move with the median move in matched quiet hours. How we measure it.