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The Federal Reserve declared a further minor increase to its benchmark interest rate on Wednesday, raising it to a range of 5% to 5.25%.
Bitcoin’s value remained largely unchanged following the announcement, oscillating between $28,000 and $28,500.
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- The hike was mostly in accordance with forecasts, as the market had only accounted for an 11.8% likelihood that the Federal Open Markets Committee (FOMC) would maintain its rate, according to the CME FedWatch tool.
- The central bank has been raising its interest rates since the previous year to address soaring consumer price index inflation, which peaked at a 40+ year high of 9.1% last June.
- Financial analysts, including BitMEX co-founder Arthur Hayes, suggested that the Fed might halt rate increases and potentially start reducing them sooner than anticipated following several bank failures prior to the last rate hike in May.
- Conversely, former Richmond Fed Chief Jeffrey Lacker believed that the Fed would continue to raise rates despite bank failures, rather than indicate to the markets that there are underlying issues.
- As of March 2023, inflation has decreased to 5% – although some speculate this may not be sustainable due to the Federal Reserve’s actions to safeguard the banking sector, which have already infused hundreds of billions of dollars back into the economy.
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“The U.S. banking system is sound and resilient,” the Fed stated in a press release that accompanied its rate hike announcement. “Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation.”
- The central bank further noted that it would modify its monetary policy approach “if risks emerge that could impede the attainment of the Committee’s goals.”
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