For the last 18 months, traders have wondered when the Fed might halt its fight against inflation, observing with anticipation since the Fed raised interest rates from near-zero last March—periodically putting pressure on the economy
The Federal Reserve on Wednesday said its benchmark lending rate will continue for now, choosing to avoid a rate rise during its latest Federal Open Market Committee (FOMC) meeting.
For the last 18 months, traders have wondered when the Fed might pull back in its fight against inflation, observing with anticipation since the Fed raised interest rates from near-zero last March—periodically putting pressure on the economy.
Inflation has decreased somewhat since the middle of 2022, Fed Chair Jerome Powell stated at a press conference on Wednesday. However, inflation pressures still run high and the process of getting inflation back down to 2 per cent has a long way to go.
The cryptocurrency market was steady after Powell’s statements, with Bitcoin and Ethereum changing hands at around the same price over a 24-hour period. A lot changed since the Fed’s announcement, however. The price of Bitcoin has declined steeply, shedding 2.6 per cent of its value during the past hour. Ethereum has fared even worse, dropping by around 5 per cent during the past hour.
After an aggressive campaign of 10 rate hikes, the Fed’s benchmark interest rate presently sits between 5 per cent and 5.25 per cent. That means the rate, which determines the interest banks and other depository institutions charge on short-term loans, is the highest since 2007.
Even though the Fed has decided to keep interest rates where they presently are, the Fed is inclined to raise rates if required. Powell said that nearly all Committee participants expected it will be appropriate to hike interest rates somewhat further by the end of 2023.
That is in spite of pressure on the financial system that showed up with the collapse of a number of regional banks and the probability of a Fed-induced recession.
Holding the target range stable at this meeting permits the Committee to evaluate more details, the Fed stated in a statement. The Committee would be ready to modify the stance of monetary policy as required if risks come up that could hamper the achievement of the Committee’s objectives.
The Fed’s clear outlook comes amid regulatory actions on the digital assets industry, sparked by lawsuits against top crypto exchanges brought by the U.S. SEC.
While Bitcoin and Ethereum have dropped over the last week—along with several other altcoins—both coins traded sideways during and after the Federal Open Market Committee’s latest move. Just after Powell’s comments, Bitcoin rose 0.1 per cent to nearly $25,900 over the past day, and Ethereum dropped 0.4 per cent to $1,730, according to CoinGecko.
Around two hours after the release of the Federal Open Market Committee’s minutes, however, prices moved significantly. Bitcoin is now trading just above $25,000, around 3 per cent lower in the last day, while Ethereum has lost over 5 per cent of its value and changing hands at nearly $1,650.
Since the Securities and Exchange Commission sued Binance and shook the crypto market on June 5, Bitcoin has declined nearly 7 per cent from nearly $26,870 and Ethereum has shed 11.7 per cent from nearly $1,870 over the same period.
