Fed Likely To Increase Rates By 50 Basis Points In December, Bitcoin Increases

Fed Chair Jerome Powell said on Wednesday that the Federal Reserve will likely increase interest rates by another 50 basis points, or 0.5 percentage point, at its eighth and last meeting of 2022.

The four rate increases made by the Fed in the past totaled 75 basis points, or 0.75 percentage points.

“It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” Powell said at an event at the Brookings Institute in Washington, D.C. “Time for moderating the pace of rate increases may come as soon as the December meeting.” A 50-basis point hike would lift short-term rates to a target range to 4.25 to 4.50%.

Following two consecutively lower-than-expected inflation data from the United States, speculation concerning a lesser rate increase has increased recently. The Labor Department informed central bankers that price pressure is beginning to ease.

The FOMC’s most recent economic estimates, released in September, predicted that rates would reach as high as 5%. The Fed chair also stated that the terminal rate would be higher than previously anticipated.

“The ultimate level of rates will need to be somewhat higher than thought at the time of the September meeting in the summary of economic projections,” Powell said.

Powell’s remarks follow a report released on Wednesday by payroll processing company ADP that revealed private hiring slowed to its lowest level since January 2021 as businesses added just 127,000 jobs in November, a sharp decline from the 239,000 jobs reported in October.

The Federal Open Market Committee (FOMC) will see the most recent nonfarm payrolls report on Friday, along with the consumer price index (CPI) next month, as the final significant economic data before its meeting on December 13–14.

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