The Fed continues its fight against inflation, arguing that the banking system remains “strong and resilient.” The Fed Open Market Committee (FOMC) announced its second rate decision of the year. The Fed increased interest rates by 25 basis points to the range of 4.75-5 percent! After the decision, Bitcoin and gold price moved from place to place! Here are the details…
The highly anticipated Fed interest rate decision was finally announced: BTC and Gold prices jumped!
Despite the FUD surrounding the US banking sector, the Fed continued its plans to quell inflation with a 25bps rate hike Wednesday. While the Federal Reserve increased interest rates by 25 basis points to the range of 4.75-5 percent, gold prices skyrocketed from $1,946 to $1,972 after the Federal Reserve’s interest rate decision. Bitcoin (BTC) price climbed above $28,600. While the FED increased the interest rate by 25 basis points in line with the expectations, the most important thing was to remove the statement from the FED text that “continuing interest rate hikes would be appropriate”.
Prior to the Federal Reserve rate decision, Bitcoin (BTC) was trading at $28,216. After the decision, the leading cryptocurrency Bitcoin (BTC), which reached the level of $ 28,752, is instantly traded at $ 28,560, as we quoted as Kriptokoin.com. According to CoinGlass data, in the last hour following the announcement, $19.64 million of assets were outflowed.
The Federal Open Market Committee (FOMC) raised interest rates by 0.25% in March 2022, the first increase since 2018. He predicted six more increases at the policy meeting in March, all of which were subsequently made. In May, the Central Bank announced the first rate hike of 0.5 percentage points, a move witnessed for the first time since 2000. This came as part of the Fed’s policy of economic tightening and has continued until now.
Markets were waiting for a rate hike by the Fed.
CPI inflation in February was at 6 percent, as the Fed tried to keep interest rates high and bring them back to their 2 percent target. Former Richmond Fed President Jeffrey Lacker suggested on Tuesday that further rate hikes are necessary to achieve this target and that the economy still has room for further tightening. Markets had largely expected the rise in interest rates this month. Experts, who made predictions with a probability of 84 percent, priced the probability of not happening as 16 percent.
Others, however, believed the Federal Reserve might be frightened by the multitude of bank failures this month, driven in part by crater bond prices spurred by rising interest rates. However, some experts argue that the Fed has put in place a de facto “cycle” through the Bank Term Financing Program, technically injecting billions of dollars into the economy without using quantitative easing.
US Federal Reserve Chairman Jerome Powell said at the press conference that the US banking system is not in danger and all user bank savings are safe. The following statement was made by the Fed:
The Committee estimates that some additional policy tightening may be appropriate to achieve a sufficiently restrictive monetary policy stance to return inflation to 2 percent over time.
The reaction of the markets
Wall Street rallied as the Federal Reserve closed its monetary policy meeting on Wednesday by raising the key policy rate by 25 basis points, as financial markets had largely predicted. Three major U.S. stock indexes, which were relatively stagnant before the announcement, rose soon after the announcement as investors weighed the Fed’s rate hike. The S&P 500 posted a gain of 0.38 percent, while the Dow Jones Industrial Average closed with a 12-point gain, corresponding to a 0.04 percent increase. The Nasdaq Composite, on the other hand, jumped 0.75 percent.
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