FED Raises Interest Rates by 0.25%, Marking Highest Level in Over 22 Years
In the early hours of July 27th, following a two-day FOMC meeting, the Federal Reserve (FED) made a momentous decision to raise interest rates by an additional 0.25%, bringing the cost of borrowing to its highest level in over 22 years. The move was widely anticipated by experts and the financial markets alike. With this decision, the Federal Reserve pushed the federal funds rate to a range of 5.25% to 5.5%, the highest since 2001.
Many analysts speculate that this may be the final interest rate hike for the time being, as the FED will likely pause to assess its impact on the economy.
In the accompanying press statement, the FED emphasized that if the path to achieving a 2% inflation target faces hindrances, they stand ready to take additional measures. The central bank highlighted that determining an appropriate interest rate level to bring inflation back to the target will involve a comprehensive evaluation of monetary policy, the timing of its impact on economic activity and inflation, as well as broader financial and economic developments.
SUMMARY OF FED DECISION (7/26/23):
1. Fed raises interest rates by 25 bps
2. Rate hike was a “unanimous” decision
3. Fed will “continue to assess additional information”
4. Future decisions depend on upcoming economic data
Interest rates are now at their highest since 2001.
— The Kobeissi Letter (@KobeissiLetter) July 26, 2023
It’s noteworthy that every decision made by the FED this year has been unanimous, yet the unity may not be as strong as it appears. Between each meeting, Fed officials often publicly disagree with one another, raising questions about the true level of unanimity within the committee.
At the time of the interest rate announcement, the cryptocurrency market saw a minor rebound, with Bitcoin rising 1.5% to $29,690 before retracing some of its gains. Overall, Bitcoin exhibited relatively low volatility compared to previous interest rate announcements in the past. This suggests that macroeconomic data from the U.S. may no longer have a significant impact on the crypto market.
Simultaneously, the U.S. Dollar Index, which measures the strength of the greenback against a basket of other major currencies, dropped by more than 0.43%, falling to 100.8 points. The decline in the dollar index may be attributed to market reactions following the interest rate hike, as well as concerns about the impact on the U.S. economy amid inflationary pressures.
Market participants and investors will now closely monitor the FED’s future actions and statements, as the central bank navigates the delicate balance between controlling inflation and supporting economic growth. The FED’s decisions will continue to have far-reaching implications for not only the U.S. economy but also global financial markets. As uncertainties persist, it’s crucial for market participants to remain vigilant and adaptable to the evolving economic landscape.
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