Bitcoin fell when the Federal Reserve announced in June that there would be no rate cut

The Federal Reserve said on Wednesday it would leave its policy interest rate unchanged despite mounting political pressure to change course.

There is no rate cut yet, says the Federal Reserve

In a press release, the Federal Reserve stated that job growth and economic expansion were “strong,” while inflation showed “modest growth” toward its 2% target.

The statement said, “The committee will be ready to adjust the monetary policy as appropriate in case of risks that hinder the achievement of the objectives of the committee.”

This comes after the US Bureau of Labor Statistics (BLS) released its latest CPI inflation reading, which showed annual inflation of 3.3 percent in May. That's slightly higher than April's 3.4 percent inflation rate, and a level higher than economists had expected, according to Reuters.

“Indices that increased in May included shelter, medical care, used cars and trucks, and education,” the BLS wrote Wednesday. Among other things, expenses on new vehicles, communication and entertainment decreased during the month.

Low inflation was a signal to markets that the Federal Reserve is moving closer to its 2% inflation target and thus may be more willing to lower policy interest rates to normal levels. This is cheap to borrow for both stocks and crypto, which have historically performed well.

Bitcoin price reaction

Bitcoin rose 3% on Wednesday morning following the publication of the May CPI, but fell slightly after the Fed's less-than-expected announcement.

Although the central bank said after the last meeting that it “does not expect that it will be appropriate to reduce the target rate in the near future”, some developments in June gave reason to believe that the Fed may hesitate.

One of those developments was the newly announced pivot from both the Bank of Canada and the European Central Bank, both of which cut their key interest rates by 25 basis points this month, citing “improved inflation.”

Also, US Senator Elizabeth Warren sent a letter to Fed Chairman Jerome Powell on Tuesday asking for a rate cut. “Decreasing prices lowers the cost of renting, buying and building a home, reducing the single largest monthly expense for Americans,” she argued.