Bitcoin Surges 1% to $29K Following Federal Reserve’s 5%-5.25% Rate Hike

In a highly anticipated decision, the Federal Open Market Committee (FOMC) announced that it will raise rates by 25 basis points, taking the Fed funds rate to 5%-5.25%, the highest it has been since August 2007. This move was widely expected, given the strong economic growth in the United States in recent months, but it also signals that the Federal Reserve is becoming more concerned about rising inflation.

Despite the rate hike, markets are more focused on whether the Fed will pause here or continue raising rates in the future. The lingering concerns over economic growth and the ongoing banking crisis have rattled nerves on Wall Street, with investors unsure about the direction of the market in the near term. As a result, stocks rose slightly and Treasury yields were mostly lower immediately following the Fed news, but stocks struggled to hold onto the gains.

BTC 1 month -chart | Source: Coingecko

The Fed funds rate is now in line with CPI inflation, which is also at 5%, and the FOMC said it seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. In addition, the committee now says that it will consider prior actions, lags to policy, and economic and financial events in deciding on further actions, versus previous meetings where the committee said it anticipated additional rate increases.

The consensus now is that the rate hikes will be paused to evaluate macroeconomic conditions. This decision suggests that the Federal Reserve is taking a cautious approach to raising rates and will carefully evaluate the impact of the rate hike on the economy before making any further decisions.

Following the news of the rate hike, Bitcoin was trading at $29k at press time, up 1% over the past 24 hours. Meanwhile, the Dow Jones Industrial Average closed lower by 270.29 points, or 0.80%, to end at 33,414.24. The S&P 500 dropped 0.70% to close at 4,090.75, and the Nasdaq Composite slid 0.46% to close at 12,025.33. The indexes notched three-day losing streaks.

Overall, the rate hike decision by the Federal Reserve has sent mixed signals to the market. While it signals the strength of the US economy, it also raises concerns about the impact of rising inflation on the economy. Investors will be watching closely to see how the Federal Reserve responds to these concerns in the coming months.

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