MCS | June FOMC Statement: Summary and Takeaway

MCS | June FOMC Statement: Summary and Takeaway

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The official statement from the recent FOMC* meeting is showing great interest from cryptocurrency investors/traders around the world as it provides a perspective and goal for the current economic situation and contains a decision to achieve it. In this post, we will take a look at a four-sentence summary of the statement and what it means for the cryptocurrency market.

* FOMC?
The Federal Open Market Committee is a 12-member committee under the Federal Reserve System. Regular meetings are held eight times a year to determine the US base rate.

The Summary of June FOMC Statement:

  1. Economic conditions are improving as the COVID-19 vaccination rate increases;
  2. Economic conditions are highly dependent on the pattern of COVID-19;
  3. To maintain long-term inflation expectation at 2%, policies that aim to exceed 2% over a period of time expect to be implemented;
  4. FOMC plans to take an appropriate stance by closely monitoring the economic situation based on various information.

The Takeaway:

Bitcoin, which faced a temporary drop in price due to concerns for early tapering, seems to be recovering again. The June FOMC made no mention of early tapering but suggested that the timing of the interest rate hike could be sooner than predicted. It is clear that the hawkish view prevailed over market expectation. Rather, it is correct to say that it has resulted in buffering the market seizure risk caused by the sudden retrenchment message.

It can be interpreted as sending a cautious signal, and until concrete indicators regarding tapering and rate hikes appear, investing in cryptocurrencies appears to be a not-so-bad deal. There is a possibility that the funds flowing in the cryptocurrency will be drained due to the announcement to increase the interest rate. However, if there is no policy change in the near future, the uncertainty can be considered nonexistent.

The cryptocurrency market is fluctuating because of FOMC!
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June FOMC Statement Full-Text:

The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals. The coronavirus outbreak is causing tremendous human and economic hardship across the United States and around the world. The virus and the measures taken to protect public health have induced sharp declines in economic activity and a surge in job losses. Weaker demand and significantly lower oil prices are holding down consumer price inflation. Financial conditions have improved, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses. The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals. The Committee will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the economy. In determining the timing and size of future adjustments to the stance of monetary policy, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor developments and is prepared to adjust its plans as appropriate. Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Loretta J. Mester; and Randal K. Quarles.

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