As forecasted by US observers, the Federal Reserve (Fed) on Wednesday released its decision on interest rates following a two-day meeting. Accordingly, the Fed lifted interest rates by 0.25%, bumping the federal funds rate to a target range of 5.0 to 5.25 percent, its highest level in more than 15 years. This marked the Fed’s 10th consecutive rate increase in order to fight inflation.
Despite the turmoil in the US banking system since March due to the collapse of many banks (the latest is First Republic Bank, which became the second largest bank failure in US history with assets of $229 billion), the Fed still maintains its strategy of raising interest rates to battle inflation.
US inflation in March continued to fall to 5%, the lowest level in more than a year and was the 9th consecutive month of decline.
The Fed’s decision once again reaffirmed that the US central bank’s goal is still to bring inflation back to 2% with other interest rate hikes in the future, quantitative tightening and monetary policy. However, the Fed also acknowledged that the lags of these measures could affect economic activity, finances and inflation itself.
After the 10th rate hike, Fed Chairman Jerome Powell said they had not yet discussed whether to stop raising interest rates at its meeting in June. Observers say that the probability of the Fed stopping raising interest rates in the June meeting is more than 80%.
Bitcoin price did not see much volatility at the time of the Fed announcement to raise interest rates by 0.25%. However, a few hours later, the cryptocurrency recovered back above the $29,000 level and is trading at $29,045 at press time.
The US will release its April CPI data on May 10 and the next meeting to adjust interest rates will take place on June 14-15.