Bitcoin Dips as Fed Chair Defers Decision to Increase Interest Rates in March
On March 8th, Federal Reserve Chair Jerome Powell spoke at a hearing before the House Financial Services Committee, stating that the central bank has not made a decision on the size of the interest rate hike expected at the end of the month.
During the hearing, Powell emphasized that “no decision has been made” regarding the pace of interest rate hikes, and that the Federal Open Market Committee (FOMC) has yet to finalize any plans for the meeting scheduled on March 21st-22nd.
The news has triggered short-term optimism among investors. During the early hours of the hearing, Bitcoin rose by 1.53% to $22,200. However, by March 9th at midnight, the cryptocurrency had returned to a downward trend. Bitcoin had lost 2.59% of its value and was trading at $21,700. Some experts speculate that the FED’s recent statements may have been more “dovish” than during the Senate meeting on March 7th. According to AZCoin News, Powell had previously noted that the Consumer Price Index (CPI) was higher than expected and that the FED was prepared to raise interest rates if necessary.
However, concerns remain that the FED may increase the benchmark interest rate to 0.5%, twice the expected rate of 0.25%. If this happens, it could adversely affect high-risk assets, including the cryptocurrency market. The immediate reaction to the news was that Bitcoin immediately dropped by nearly $400 to just over $22,000.
During the hearing, Powell also revealed that several key economic reports would be publicly released leading up to the FOMC meeting. The US will publish its February employment report on March 10th, and inflation figures will be released the following week. These data points are crucial to the FED’s interest rate policy decisions.
Additionally, a lawmaker at the hearing asked Powell about the possibility of a Central Bank Digital Currency (CBDC). Powell responded that the agency has no immediate plans to issue a digital US dollar but is in the early stages of testing.
“We’re exploring how it might work, and whether it has any advantages, and where the technology stands,” he said.
The idea of a digital USD has been under discussion in the US Congress since 2020, and in March 2022, President Joe Biden issued an executive order to study CBDC.
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