Federal Reserve Hikes Rates Again; Yet Market Reacts Positively

Federal Reserve

The United States Federal Reserve increased interest rates, again. The central bank’s major tool to curb the rising inflation that recently started in March last year, continued this year as well with a recent hike. Increase in the interest rate on Wednesday is different from the others during the last year given that it was the lowest hike since then. 

Lowest Since Last Eight Hikes

Until now, the Fed increased the interest rates eight times, out of which initially four times it was raised by about 75 basis points. While the following hikes moved towards decreasing with 50 basis points. The recent jump in interest rate is the smallest as it rose by only a quarter of percentage or 25 basis points. 

Target range still is expected to roam around 4.5%-4.75%—that remains the highest since October 2007. The Fed is keen on reigning over the growing inflation which is currently highest since the 1980s. Although several data and reports showcase the ease in inflation, it remains relatively high. 

Chairman of Federal Reserves, Jeremy Powell himself said that the last three month’s data shows decreasing monthly pace of growing inflation. However his statements were cautious as he said that recent developments might be encouraging but to be more confident about reduction in inflation, it would need some more evidence. 

Trend of Market Drop Following Hikes

Throughout the last year it remained a common trend as whenever the Fed came up with the hike in interest rates, the markets witnessed shivering. The case remained the same this time as well initially which didn’t last long though. Both stock and crypto market started dropping following the news of Fed’s another action to win over inflation. However, soon after the interest rate hike, the market stabilized and rather showed an upward movement. 

TheCoinRepublic reported earlier that after the interest rate hike news, S&P 500 and NASDAQ dropped 1.3% and 1.9% respectively. While the global crypto market slid to 1.04 trillion USD after shedding 3.68% along with major cryptocurrencies Bitcoin and Ethereum going dropping below 23,000 and 1,600 USD. 

Market bounced back after the Chairman’s “disinflationary process” statement that brought positive sentiment. He admitted that the process has started, though it would be “very premature” to consider this as a win over inflation. 

Major indices including S&P 500 and NASDAQ closed trading in the green zone after 1.05% and 2% jump respectively. The global crypto market witnessed an impressive jump of 4.18% and held a market cap of about 1.9 trillion USD at the time of writing. Bitcoin is trading at 23,844 after 3.3% and ETH at 1,672 after 5.7% increase in the last 24 hours. 

Source: https://www.thecoinrepublic.com/2023/02/02/federal-reserve-hikes-rates-again-yet-market-reacts-positively/