The Federal Reserve made its ninth quarter-percentage-point rate hike since March 2022, with Chairman Jerome Powell cautioning about the recent banking crisis and indicating that the hikes are nearing an end.
While the Fed is considering an end to the rate hike, it is important to note that the fight against inflation is not over. The Fed remains determined to bring inflation under control and achieve its 2% target.
The FOMC post-meeting statement highlights that “The Committee will closely monitor incoming information and assess the implications for monetary policy. The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”
The rate hike was expected, but the markets did not absorb the decision well, with the top three Wall Street indices dropping by 1.6% in the wee hours. In the crypto space, there has been some selling pressure, with Bitcoin dropping by over 2% to $27,742 with a market cap of $536 billion.
Bitcoin and altcoins have been under similar selling pressure, with Ethereum (ETH) and all other top ten altcoins also experiencing a drop. The recent banking crisis has led to Bitcoin becoming a trusted destination for investors, and it has had a phenomenal rally this year.
It remains to be seen how the market will react to the rate hike in the long term, but it is clear that the Fed’s fight against inflation is far from over. The Fed’s decision to tighten monetary policy could lead to tighter credit conditions for households and businesses, which could weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain, but the Fed remains highly attentive to inflation risks.
In conclusion, while the rate hike was expected, it remains to be seen how it will impact the markets in the long term. The Fed remains determined to bring inflation under control, and it is important to keep an eye on future rate hikes and the implications for the market. For now, Bitcoin and other cryptocurrencies are experiencing a mild correction along with US equities.
