Hot Hours in Bitcoin – FED Talks About Rate Increases! Today, the Federal Open Market Committee (FOMC) began a two-day meeting. It signaled that it plans to raise interest rates again, the eighth in less than a year.
The Fed said it is likely to raise its target range for the federal funds rate again in March and possibly in May. It also repeated language it has used previously that “ongoing increases in the (interest rate) target range will be appropriate.”
1. The FED Talks About Rate Increases
The crypto market is enjoying a short-lived rally after the Federal Reserve (FED) raised interest rates to a record low, but investors aren’t feeling very optimistic about future rate hikes. Fed chair Jerome Powell is expected to deliver a speech in which he may signal a slowdown in rate hikes, and Friday’s U.S. jobs report could also have an impact.
Inflation has been climbing at the fastest pace in nearly four decades, and the Federal Reserve has embarked on a brutal series of interest rate hikes to try and bring it down. This year, the Fed has raised its benchmark interest rate seven times – including two hikes in December 2022 – and is likely to continue raising it into March 2023.
Traders are hoping the Fed will soften its aggressive monetary tightening strategy, but the markets are still worried about inflation and an economic recession. As of this writing, stocks have dropped about 20% from their recent highs.
With inflation at its highest in 13 years, the Fed is urging Americans to cut back on spending and invest in their businesses instead of buying stuff. It’s all part of its effort to keep the economy from slipping into a recession.
It’s also important to remember that inflation is caused by the money supply, and the Fed has multiple tools at its disposal to regulate the supply of cash in the U.S. The most prominent tool is the federal funds rate, which acts as a benchmark for the interest rates that large commercial banks charge each other on overnight loans.
As it stands, the federal funds rate is currently at 4.5% to 4.75%, which is higher than it’s been since 2006 and has prompted fears that the Fed may eventually raise interest rates to 5%. Inflation is a serious concern because it means that borrowing money becomes more expensive for people and companies.
The recent rate hikes will undoubtedly have a negative effect on the price of cryptocurrencies like Bitcoin and Ethereum. But that shouldn’t be too hard to deal with because these currencies are less sensitive to macroeconomic events than most other financial assets. As a result, these currencies will likely remain range bound until there’s clarity on regulation.
2. The FED Talks About Rate Increases
The Federal Reserve has a lot of responsibilities when it comes to managing the economy, but one of its most effective tools is interest rates. It sets the federal funds rate, which is used to determine how much banks charge each other for overnight loans.
When the Fed increases interest rates, it’s trying to tame inflation and keep the price of goods and services stable. The Fed is also concerned that further increases in the cost of borrowing will lead to a recession.
During the latest FOMC meeting, the Fed increased the short-term interest rate by 25 basis points, which brings it to a range of 4.50% to 4.75%. That’s not nearly as aggressive as the 75 basis point hikes the Fed put in place last year, but it’s still enough to slow consumer prices.
Inflation has been running at around 6.5 percent over the past year, and many market watchers believe that the Fed will have to continue to raise rates this year if it’s going to slow inflation down. But the markets are divided as to whether or not this is a good idea and that uncertainty has fueled volatility in stock prices.
On Wednesday, the Federal Reserve announced that it would increase its interest rate by another 25 basis points. The decision followed a 50 basis point increase in December and a 0.75% increase in November.
This is the eighth time that the Fed has raised rates in a row, and it’s part of its efforts to combat rising inflation. In fact, this is the first time that the Fed hasn’t cut its rate since the financial crisis in 2008.
The Fed lowered its outlook on growth and unemployment during its statement, but it said the economy still faces risks from trade wars and political unrest, as well as higher interest rates. The Fed will also continue to monitor economic indicators such as inflation, unemployment and job creation to determine if a rate cut is necessary.
On Wednesday, the FOMC said that monetary tightening will continue until it “really has the job done,” meaning that there’s likely to be further hikes this year. The Fed is expecting to bring inflation back to its target range of 2% over time.
3. The FED Talks About Rate Increases
As you probably know, the Fed has been raising rates this year as it tries to curb inflation. When interest rates rise, it costs people more to borrow money and therefore people spend less. It’s a simple, but effective way to combat rising prices.
As the economy slows down, inflation is expected to remain a challenge for years to come. That’s why the Fed continues to raise interest rates.
The central bank is working to fight high inflation with the hope that it will bring down the Consumer Price Index to its target of 2% over time. It is aiming for this by calibrating interest rate increases, which slow demand just enough to cool the economy and lower prices.
After four straight 0.75 percentage point interest rate hikes this year, the futures market has priced in a 70% chance that the Fed will deliver another 0.5 percentage point increase at its December meeting. That’s a far cry from what the futures market was betting at the beginning of the year, when most expected a larger rate hike.
That’s why some investors believe that the Fed will eventually soften its stance and start to ease up on rate hikes. And that could be good news for crypto markets.
It’s also important to remember that the Fed has been raising rates this year as a way to suck liquidity out of the financial system. That means that it will have to sell some of its $4.5 trillion in assets, which could impact the value of stocks and other risky assets.
If the Fed does decide to soften its stance, it will most likely have to wait for strong jobs data to show that the economy is improving before it makes any changes. The Fed also has to be careful to avoid overshooting its 2% target for inflation.
While a rate hike could affect crypto markets, it will be unlikely to have a major effect. Moreover, it is not uncommon for cryptocurrencies to bounce back in the wake of an interest rate hike due to their appeal as a hedge against inflation.
4. The FED Talks About Rate Increases
The Federal Reserve raised interest rates by a quarter point on Wednesday, a move that helped lift the stock market. But it was an ambiguous move that caused markets to nervously await Friday’s jobs report, which could signal a possible slowdown in rate hikes.
The Fed’s decision comes amid a wave of inflation that has driven up prices across the economy — including fuel, housing, and food. It’s an issue that’s becoming increasingly apparent as the US’s consumer price index (CPI) hit a 40-year high last month.
Many Americans are worried that inflation is driving up their bills despite efforts by the Fed to cool the economy and curb prices. And a recent CNBC poll found that 96% of citizens were concerned about rising prices, including those at the pump and in their homes.
Inflation is a problem that’s growing worse by the day, and it’s causing a lot of pain for many Americans. That’s why it’s so important that the Fed take steps to lower prices and curb inflation.
On Wednesday, the Fed raised its benchmark interest rate by a quarter point. It’s the third rate hike this year, and it’s the fifth since December 2022.
But the Fed hasn’t backed away from its hawkish approach to monetary policy, and the latest rate increase is just another sign that it’s continuing to take action against inflation. In fact, Fed Chair Jerome Powell has vowed to “keep at it” as long as the inflationary threat remains.
It’s a big reason why Bitcoin and other cryptocurrencies have recouped most of their losses in the past few days, following the Fed’s announcement. The largest cryptocurrency also saw some of its most bullish trading hours in a month.
However, even though the crypto market has bounced back, it’s not quite back where it was. The crypto market has lost about 40% of its value this year, and it’s still under pressure from the central bank’s dovish monetary policies.
That means investors aren’t too confident about the long-term prospects of Bitcoin and other cryptocurrencies. It’s also why they’re so hesitant to sell their holdings.