The United States Federal Reserve is getting tougher, and interest rate hikes have taken a toll on the crypto market. Earlier this month, Bloomberg analyst McGlone said bitcoin would outperform traditional equities due to a hike in interest rates. However, up to this point, bitcoin has not followed the predicted trend of Bloomberg.
In fact, despite Bloomberg’s bullish outlook, bitcoin and other cryptocurrencies are still in a crash. For example, BTC and ETH fell by 2% after the Fed announcement and made a comeback. But now it has crashed again. BTC is currently trading below $19,000.
The Federal Open Market Committee of the Fed Reserve manages the economy during inflation and recession by controlling the money supply in the country. The Fed maintains the money supply through quantitative tightening and easing of reserves. As a result, an increase in interest rates triggers volatility in the market.
Inflation will fall to 2% by 2025, says Federal Reserve
The Federal Reserve revealed its plan to tackle inflation at Thursday’s Federal Open Market Committee meeting. The Fed’s 75 bps interest rate hike is just the tip of the iceberg as it plans to raise rates by 400 bps by the end of 2022.
In August, the CPI indicated 8.3% YoY inflation, but the Federal Reserve forecast a reduction in inflation to 2% by 2025. The Fed Reserve plans to bring inflation down to 5.4% by 2022 and 2.8% by 2023. Reports show that the Fed raised this year’s interest benchmark four times. The current rates range from 2.25% to 2.50%.
From CNBN Fed Survey For September, the Fed’s interest hike will remain at the peak rate for 11 months. John Riding, chief economic advisor at Brain Capital, commented in response to the survey.
Riding said the Fed has finally realized the inflation problem is serious. He believes the Fed’s monetary hardening rate is a ‘positive real policy rate’. Economists advise the Fed to increase the current rate by 5%.
The survey pointed out that some economists, strategists and fund managers out of 35 survey respondents think the Fed may increase its toughness.
Recession will affect global economy – World Bank
The World Bank says that the recession will affect the global economy due to the war-like monetary policies of the world economy.
Northman Trader founder Swan Heinrich believes interest rates will depend on recession next year rather than inflation. He thinks Fed Reserve Chairman Jerome Powell emulates Paul Volcker. Heinrich further advised Powell to pivot before meeting the 40bps rates target. Paul Volker is the former chairman of the US Fed Reserve.
Jerome declined to say much about the downturn, saying he didn’t know the depth or when the recession would hit. Meanwhile, the Fed dismissed all speculation of a recession.
Everyone is waiting for the release of the following inflation data in the Consumer Protection Index for September. In addition, the next Federal Open Market meeting will take place on November 2.
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