Fed raised interest rates for the fourth time this year
The US Federal Reserve (Fed), on July 28, officially announced to increase interest rates by 0.75%, pushing it from 1.5% to 2.25%, marking the fourth consecutive increase this year. It brought rates back to the level of 2018, the time before interest rates were cut to near zero to bolster the US economy in the face of COVID-19.
So far, the Fed has raised interest rates 4 times this year, in March (0.25%), May (0.5%), June (0.75%), and July (0.75%). The Fed wants to get rates up to 3%-3.5% by the end of this year through the remaining meetings in September, November and December. This is what the Fed needs to do to regulate the market when inflation could get out of control.
US inflation, which is reflected by the consumer price index (CPI), in June reached 9.1% – the highest level in the past 4 decades and exceeded all experts’ predictions. In fact, the Fed’s continuous pumping of money into the market since mid-2020 to deal with COVID-19 breakout is not the only cause of high inflation. It also stems from the energy crisis, the Russian-Ukraine war causing significant disruption to supply chain, and China’s zero covid policy.
Fed Chair Jerome Powell, at his press conference on Wednesday, provided relatively clear guidance about coming rate rises:
- Inflation is currently too high, the Fed will continue to adjust the money supply to battle inflation.
- June inflation was worse than expected.
- The next interest rate hike in September will likely see an unusually large interest rate increase.
- The Fed aims to get rates up to 3%-3.5% by the end of this year
- The US economy may be slowing down but not in a recession.
The US is also set to release key data on GDP on Jul 28, an indicator that shows whether the world’s largest economy is entering a recession. According to Bloomberg, economists expect the US GDP in the second quarter to grow slightly by 0.4%.
Crypto market recover strongly
While the Fed’s rate hike is often seen as a negative move, it was probably predictable so both the US stock market and the crypto market all responded in a positive way. As soon as the Fed confirmed the interest rates increase by 0.75%, Bitcoin (BTC) regained momentum, even hitting $23,100. The world’s largest cryptocurrency is stabilizing around the $22,700-23,000 range while previously, BTC at one point dropped to 20,706 on July 26.
The second largest cryptocurrency Ethereum (ETH) also bounced back, up more than 12% in the past 24 hours to $1,644. The biggest gainer over the past 12 hours is Lido (LDO) with a surge of nearly 45%. Other major cryptocurrencies are also up 6-20%. The market capitalization is stabilizing around $1.045 billion.
Follow our channels for more crypto news:
- Cryptory Insights: https://t.me/CryptoryInsights
- Cryptory Global Community: https://t.me/CryptoryCommunity
- Facebook: https://www.facebook.com/CryptoryNetwork
- Twitter: https://twitter.com/CryptoryNetwork