Only after the U.S. Federal Reserve declared a 0.75% increase in interest rates on September 21 did the world’s markets suffer.
Crypto markets quickly reversed downward after an early period of turbulence, during which BTC and ETH reached newer daily highs of $19,900 and $1,400, in that order. Although Bitcoin experienced a 2% daily decline, Ether reported a dropping off about 6%. The price of ETH has stabilized and was down 4% over the previous 24 hours as of early in the morning trade U.K. time.
In his introductory remarks, Fed Chairman Jerome Powell stated that he believes further rate hikes will be necessary to bring inflationary pressure under control to the Fed’s goal level of 2%.
The Fed’s assessment of macroeconomic estimates, according to Jordi Alexander, CIO of Selini Capital, predicts that the federal funding rate will peak in 2023 at 4.6%.
The targeted federal funding rate is currently around 3% to 3.25%; thus, additional growth of 1.5% is required to reach a similar mark in 2023. Alexander pointed out that the long-term rate prediction was approximately 2.5%, which means the Fed expects rates to decline by more than 2% from the peak predicted for 2023.
The Fed also made it clear that it would keep selling off its holdings of Treasury bonds and other assets.
Monetary tightness is the method of reducing the amount of money in circulation, which raises the cost of capital investment.
In accordance with the Chicago Mercantile Exchange (CME) FedWatch tool, 82% of investors expected a 75 bp raise before today’s Fed session. The federal funds rate-based futures contracts that the CME uses to calculate this probability. Nearly 65% of investors as of 10 p.m. ET anticipate a further increase of 0.75 % in November.
As per data issued by the Bureau of Labor Statistics, retail prices are increasing in the United States at their quickest rate in forty years. The central bank is under pressure to hike rates to calm the economy down due to this ongoing price growth.
U.S. Treasury securities become more alluring as interest rates rise, which can draw money away from volatile investments like equities and cryptocurrencies.
Powell made an effort to maintain his hawkish stance from Jackson Hole when he was clear that their only present objective was to increase inflation. In his August Jackson Hole statement, the Fed chair addressed the inflation issue nearly entirely.
The investor believes Powell was forced to acknowledge that new information might cause the Fed to turn its attention away from inflationary.
Since June 2002, the US Dollar Statistic (DXY), a popular indicator used to assess the dollar’s value to other world currencies, has been at its highest level.
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