The US Federal Reserve is tightening, and the interest rate hike has had a huge impact on the cryptocurrency market. Earlier this month, Bloomberg analyst Mike McGlone said that Bitcoin will outperform traditional stocks as interest rates rise. However, as of this moment, Bitcoin does not appear to follow Bloomberg’s expected trend.
As a matter of fact, despite Bloomberg’s bullish view, Bitcoin and other cryptocurrencies are still in a meltdown. For example, BTC and ETH fell 2% after the Fed announcement and bounced back. BTC is currently trading at less than $19,000.
The Federal Reserve’s Federal Open Market Committee (FOMC) manages the economy during inflation and recession by controlling the money supply in the country. The Federal Reserve maintains the money supply through quantitative tightening and buffering. As a result, higher interest rates cause market volatility.
The Fed says inflation will drop to 2% by 2025
The Federal Reserve revealed its plans to tackle inflation at the Federal Open Market Committee meeting on Thursday. The Fed’s 75 basis point rate hike is just the tip of the iceberg as it plans to raise rates to 400 basis points by the end of 2022.
In August, the CPI indicated an inflation rate of 8.3% year-on-year, but the Fed expects inflation to drop to 2% by 2025. The Fed plans to reduce inflation to 5.4% by 2022 and 2.8% by 2023. Reports indicate that the Federal Reserve has raised its benchmark interest rate for this year by four times. Current rates are between 2.25% to 2.50%.
From CNBN Fed Survey For September, the Fed rate hike will remain at its peak for 11 months. John Riding, chief economic advisor at Brean Capital, commented in response to the survey.
Riding said the Fed has finally realized that the problem of inflation is critical. He believes that the Fed’s monetary tightening rate is a “positive real policy rate”. The economist advises the Fed to increase the current rate by 5%.
The survey reported that among 35 survey respondents, some economists, strategists and fund managers believe the Fed may be over tightening.
Recession will hit the global economy – World Bank
The World Bank says a recession will hurt the global economy due to war-like monetary policies in the global economy.
Svan Henrich, founder of Northman Trader, believes interest rates will depend more on stagnation than inflation next year. Jerome Powell, Federal Reserve Chairman, is believed to be emulating Paul Volcker. Henrich Powel also advised pivoting before the 40bps target was reached. Paul Volcker is the former chairman of the US Federal Reserve.
Jerome refused to say much about the recession, saying he didn’t know the depth of the recession or when it would happen. Meanwhile, the Fed dismissed all speculation of a recession.
Everyone is waiting for the next September CPI inflation data. In addition, the next Federal Open Market Meeting will be held on November 2.
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