As analysts predicted, the Fed has continued to raise interest rates to fight sky-high inflation. The federal funds rate is the target interest rate set by the Fed at which commercial banks borrow & lend their extra reserves to one other overnight.
The Fed has continuously raised the federal funds rate by 0.57% during the last two meetings, bringing it to the range of 2.25 – 2.5%. This is the fastest pace of rate hikes since the US used the federal funds rate as a benchmark in the early 1990s.
In fact, Fed Chairman Jerome Powell has previously stated that the Fed remains as hawkish, maintaining interest rate hikes to reach the 2% inflation target by the end of the year. Therefore, analysts expected the Fed to still increase by 0.75% in this adjustment.
According to the latest data, the Fed announced it was raising its key rate by another percentage points, lifting the target range off 3-3.25%. The Fed this year still has 2 more interest rate adjustments in November and December.
Although it was predictable, the Fed’s interest rate hike still negatively impacted the crypto market. Over the past hours, Bitcoin has dropped severely from a peak of $19,556 at the time of the Fed announcement of new interest rates to only $18,125 – the lowest threshold since the bottom of $ 17,622 in mid-June.
Ethereum (ETH) also dropped to $1,220, its lowest level since mid-July. Previously on September 13, after news that US inflation in August continued to escalate, the crypto market also dumped strongly.
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