The US Federal Reserve has raised interest rates by 25 basis points, bringing its target range to 3.75%–4.00%. The Federal Open Market Committee approved the increase unanimously, marking the first rate hike since 2023.
Cryptocurrency markets showed a muted response to the decision. Bitcoin declined approximately 0.2% over 24 hours, while Ethereum remained nearly unchanged. Other digital assets showed mixed movement, with Solana and BNB posting slight losses and XRP dropping over 2%. The total crypto market value, excluding stablecoins, was 0.8% higher than 24 hours prior at around $2.29 trillion.
Fed Refocuses on Inflation
Fed Chair Kevin Warsh cited strengthening economic conditions and resilience in consumer spending and business investment as reasons the central bank had held rates steady in July. He noted that the labour market continued to operate close to full employment.
With the economy performing relatively strongly, the Fed has shifted its attention back to inflation, which remains above its 2% target. The Fed projects inflation will average 3.7% in 2026, decline to 2.3% in 2027, and not return to its 2% goal until 2029.
Further Increases Possible
According to the Fed's economic projections, the median policy rate is expected to reach 4.1% by the end of 2026, suggesting another possible quarter-point increase may follow. The Fed also revised its inflation expectations upward, now expecting inflation around 4.1% in 2027, compared to the 3.6% forecast from June.
Financial markets had priced in approximately a 90% probability of this rate increase before the announcement.
Implications for Crypto
Elevated interest rates typically shift investor capital toward cash and government bonds, reducing appetite for riskier assets like Bitcoin and altcoins. The prospect of additional rate hikes ahead, combined with expectations of no cuts in the coming year, could limit the strength of any crypto market recovery.
