Federal Reserve raises interest rates by 25 basis points, first hike since July 2023
Fed lifts benchmark rate for the first time in over three years
The U.S. Federal Reserve raised its benchmark interest rate by 25 basis points on Wednesday, bringing the fed funds rate target range to 3.75%-4.00%. A basis point is one-hundredth of a percentage point. This was the central bank's first rate hike since July 2023, ending a pause of more than three years.
The decision had been widely expected by market participants, according to CoinDesk. The fed funds rate is the interest rate at which banks lend money to each other overnight, and it influences borrowing costs across the broader economy.
What the Fed said in its policy statement
In its policy statement, the Federal Open Market Committee (FOMC) described the economy as expanding at a "solid pace" and noted that "domestic spending has been resilient." The committee also said that "uncertainty remains elevated owing, in part, to geopolitical developments" and that "inflation remains elevated."
The FOMC stated that the rate hike was intended to "support a timelier return to the Committee's 2 percent goal" for price stability, which generally means keeping inflation low and steady.
The vote and the outlook for further hikes
The vote to raise rates was unanimous. According to the Fed's "dots" plot, which shows each policymaker's individual rate expectations, the central bank expects to hike rates one more time in 2026. The dots are an informal way of tracking where the Fed's officials think interest rates are headed.
Market reaction in the minutes after the announcement
Bitcoin, the largest cryptocurrency by market value, was volatile in the moments following the announcement but was little changed from before the news, trading around $75,700. U.S. stocks continued modestly higher and bond yields moved slightly lower.
What is confirmed
- The Fed raised the fed funds rate by 25 basis points to a range of 3.75%-4.00%.
- This was the first rate hike since July 2023.
- The vote was unanimous.
- The Fed's dots signal expects one more rate hike in 2026.
- Bitcoin was little changed near $75,700 shortly after the announcement.
What is still unclear
The exact timing of any additional rate hike in 2026 has not been specified beyond what the dots plot indicates. Fed Chair Kevin Warsh's post-meeting press conference was scheduled for 2:30 pm ET on the day of the announcement, and further guidance from that press conference was not available in the source material.
Why it matters for crypto markets
Interest rate decisions by the Fed are closely watched by crypto traders because changes in monetary policy can affect the appeal of riskier assets like Bitcoin. Higher rates can make savings and bonds more attractive by comparison, while lower rates tend to push investors toward assets seen as having higher growth potential. The fact that Bitcoin showed little immediate change suggests the market had largely priced in the expected decision.