The Federal Reserve Has Approved A Half-Point Interest Rate Hike, Cryptocurrency Trading Like Big Tech.

The Federal Reserve raised interest rates by half a percentage point on Wednesday, a move that the market had expected given that inflation has remained more than a percentage point above the central bank’s target.

The Federal Reserve also announced plans to decrease its $9 trillion asset portfolio, beginning with allowing bonds to mature without being reinvested in new securities rather than being sold on the open market.

Fed Chair Jerome Powell said during a press conference following the release of the statement:

“Inflation is much too high. It is essential we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all.”

Following the announcement, stocks were mostly stable, with the Dow Jones Industrial Average climbing 0.4%, the S&P 500 staying flat, and the tech-heavy Nasdaq falling 0.5%.

Jeffrey Howard, head of institutional sales and business development at OSL, said:

“50 basis points was priced in the market, so that was expected. The market rallied initially and then has sold off just a little bit since then because there are some more hawkish comments coming out regarding a potential 75 basis point hike on the next meeting.” 

According to Powell, the committee is not “actively considering” a 75-basis-point raise, but another 50-basis-point hike is likely if existing inflation and market circumstances persist.

On the news, bitcoin and ether both rose by roughly 3.5% and 1.2%, respectively. Cryptocurrencies have been trading in line with equities recently, similar to a big tech stock, according to Howard.

“Not only on tech stocks, but on risk assets in general, market sentiment is highly pessimistic,” Howard added. “Risk assets do not do well in a rising rate environment, thus I believe the market is bearish in general.”

Despite economists’ concerns that the Fed has been too sluggish to act on inflation, Powell is convinced that the central bank will be able to avoid a recession.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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Patrick

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