The U.S. Federal Reserve (Fed) chair Jerome Powell announced yet another rate hike to bring inflation down to the 2% mark. This is the eighth consecutive time in less than a year that the Fed has increased the interest rates.
The Federal Open Market Committee (FOMC) has raised interest rates by 25 basis points (bps), or a quarter of a percentage point, for the first time in 2023. According to Powell’s speech, the main goal of the rate hike is to tame inflation, currently sitting at 6.5%, while preventing a recession in the U.S.
“Restoring price stability will likely require maintaining a restrictive stance for some time.”
Fed chair Jerome Powell
Fed chair Jerome Powell did sound hawkish at 2:30 P.M. ET. press conference, meaning he will lean towards tighter policy and keeping interest rates high in the next FOMC meeting. He also suggested ending the rate hike regime in the next one or two FOMC meetings.
How US interest rates impact crypto markets
Andrew Weiner, the Vice President of the MEXC crypto exchange, does not expect any “interest rate cuts” in 2023. He believes that Wall Street doesn’t buy it.
In a comment to crypto.news Weiner said:
“US Stocks rally on Fed’s no-surprise rate hike, so does BTC. In other words, a 25 basis point rate hike is priced in.”
Andrew Weiner, MEXC Global VP
The VP of MEXC Global believes that a “soft landing is possible” while preventing entering into a recession. Weiner stated his optimism for the crypto markets in the first quarter of 2023:
“The focus will be on whether Powell acknowledges the recent softening in inflation and economic activity, bolstering markets’ hopes for an early pivot toward easing.”
Andrew Weiner, MEXC Global VP
Crypto markets are in the green
A few hours after the rate hike, the digital currency market showed bullish signs as the top 12 crypto assets, excluding stablecoins, turned green. Bitcoin (BTC) surged by 3.37% in the past 24 hours and is currently trading at $23,828 with a $459 billion market cap.
The top three gainers after the Fed meeting are avalanche (AVAX), polygon (MATIC) and binance coin (BNB), with 14.4%, 12.2% and 7.1% break-offs in the past 24 hours. Furthermore, the top gainer over the past week is MATIC — up by 22.3% in the last seven days and trading at $1.22 at the time of writing.
It’s important to note that the global crypto market cap has risen from roughly $1.03 trillion at the time of the Fed statement to $1.08 trillion at the time of writing, according to CoinMarketCap data.
Fed’s steady approach
A slow, steady approach
The Fed raised the rates by 50 bps during the December meeting, which was a major slowdown from the former meeting. Over four consecutive prior meetings, the FOMC raised short-term rates by 75 bps.
The Fed is now taking a more steady approach to observe incoming data more clearly and react accordingly. In addition, they announced some adjustments to the rates. The officials set the policy rate target range at 4.5% to 4.75%, which is way up from the near-zero mark last year. They also acknowledged that inflation ceased but remained high. Hence, the increased target range, as they said, was appropriate.
Jerome H. Powell, the Fed chair, mentioned that even with the inflation slowing down, it was still in the “early stage,” so they would keep raising rates as inflation moderates. He also added that he thinks the Fed can get inflation back to 2% without losing so many jobs.
He concluded with stern words for lawmakers, saying that there remains one way forward whereby the debt ceiling needs to be raised. He added that no one should make assumptions about the Fed protecting the economy as it can’t avert big problems if it’s not raised.
This article was written with additional reporting by Adam Robertson.
Source: https://crypto.news/expert-is-optimistic-on-crypto-after-the-fed-rate-hike-markets-turn-green/