US Interest Rate Hits Highest Level In Over 2 Decades, But Bitcoin Appears Un-bothered


As made necessary by the current level of inflation, the U.S. Federal Reserve has announced a 0.5% interest rate hike. The announcement was made during the just-concluded Federal Open Markets Committee (FOMC) meeting that took place on Wednesday. But while the current rate hike represents twice of what it was last month, it also is, the biggest hike since May 2000.

But as they say, desperate times call for desperate measures. And CPI statistics currently puts inflation at 8.5% — its highest level in more than 40 years. So, it’s only understandable that the Fed chair Jerome Powell, began his post-meeting press conference with an “Inflation is much too high” message to Americans.

However, both the Federal Reserve and the Central Bank are fully focused on resolving the present situation. So with their commitment to restore price stability and soften the economy for American families, the duo will be deploying every tool at their disposal to make things work.

To that effect, there are expectations that the Fed will hike interest rates some few more times this year. Whereas, the central bank has also started reducing the size of its balance sheet.

Bitcoin’s Price Movement To Interest Rate Hike

Meanwhile, leading cryptocurrency Bitcoin earlier looked as though it would not be affected by the announcement. And just as DailyFX strategist Nicholas Cawley predicted, the effect of Fed’s announcement was indeed minimal. At least, initially. Recall that Cawley had earlier said:

“It is very unlikely that a neutral Fed outcome of a 50 basis point rate hike will have any noticeable effect on the cryptocurrency market”

Later on, Jerome Powell would also rule out the possibility of a 75-basis-point or 0.75% rate hike. However, that caused Bitcoin to jump excitedly, rising by nearly 6%. In fact, at some point, the leading crypto rose as much as $40, 000, even as the entire crypto market jumped along with it. Meanwhile, S&P 500 also saw a 2% spike.

Possibility of Recession?

Well, the U.S. economy could only ever slide into recession if a very high rate hike is implemented. Especially now, seeing as the country is just wriggling out of the mess caused by the COVID-19 pandemic.

But as the Fed has confirmed, there may be a few more hikes down the road in 2022. Except of course, if inflation begins to flatten out.

Mayowa Adebajo

Related Articles

Stay Connected


Latest Articles

%d bloggers like this: