Recaps · FOMC · 13 Dec 2023, 19:00 UK

The pivot, in dots

The hold was expected. The surprise was in the projections: officials pencilled in three rate cuts for 2024, more than they had signalled before. Stocks jumped on the release and kept rising through the press conference. Bitcoin climbed more slowly, but for longer.

Decision

Wednesday 13 December 2023, 19:00 UK

Rate

Held at 5.25% to 5.50%

Projections

Median 4.6% at end-2024, three quarter-point cuts (Fed)

Powell

Further hikes "not likely" (Reuters)

Bitcoin at decision

$42,133

The decision

The Fed held rates for the third meeting in a row. Its projections showed rates ending 2024 at 4.6%, three quarter-point cuts. CNBC wrote that this was less than the market had priced but more than officials had previously indicated. Reuters reported that 17 of 19 officials expected lower rates by the end of 2024, and that Powell said the Fed was "very focused on not making the mistake of keeping rates too high for too long". The Dow closed at 37,090, its first record since January 2022.

A slow, steady climb

Bitcoin rose +0.52% on the release and was +1.45% after an hour, #17 of 80 Fed decisions at 3.3 times a normal hour. It kept rising after US stocks closed and peaked about 3.1% up at 22:10 UK. Stocks moved earlier and faster: the S&P 500 ETF was +1.2% after an hour.

Market expectations ran ahead

CNBC reported that after the meeting, markets priced in 1.5 percentage points of cuts in 2024, double the Fed's own median. In the end the Fed did not cut until September 2024, and cut by a full point that year. This is a common pattern on dovish turns: the market takes the new direction and extends it. That makes the first reaction a good read on the mood, but a poor forecast of policy.

The change from a year earlier is striking. At the December 2022 decision, the projections showed no cuts at all in 2023 and Bitcoin fell 2.3% in the hour. Twelve months later the same meeting brought cuts into the forecast, and the reaction flipped sign. Reuters reported the S&P 500 and Nasdaq each closed 1.4% higher.

The rally was wider in smaller coins. Cardano moved 8.3 times its normal hour and was +7.2% at four hours. Solana was +5.1% at four hours and +22% over the following week, against Bitcoin's +4.8%.

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.