Fed Hikes Rate: Crypto Markets Brace for Turbulence24. Februar 2023
• The Federal Open Market Committee (FOMC) recently released the minutes from its 1st February meeting, indicating further increases to interest rates will be necessary in order to keep inflation at their target of 2.0%.
• Financial markets have shifted their expectations of Fed tightening, with most analysts now forecasting two more 25 bps rate hikes – one at the February meeting and another at the March meeting.
• Some market participants are even betting that the 25 bps rate hike in February might be the Fed’s last this cycle.
Rate Hikes Coming From US Federal Reserve
The US Federal Reserve is planning further increases to interest rates in order to ensure that inflation comes sustainably back to the 2.0% target. This was indicated by the recently released minutes of the 1st of February meeting of the Federal Open Market Committee (FOMC). At their last meeting earlier this month, FOMC raised interest rates 25 bps to a 4.50-4.75% target range and almost all members backed this slowdown from previous 75 bps hikes.
Expectations Changed After Hot Data Releases
Financial markets have spent recent weeks adjusting their expectations as strong/hotter-than-expected US data releases forced them to up Fed tightening bets. Most analysts are now forecasting two more 25 bps rate hikes – one at the February meeting and another at the March meeting, while some believe that this month’s hike might be last for this cycle. Money markets now imply a 27% probability that the Fed might raise interest rates by 50 bps (to 5.25-5.50%) next month, with expected peak in June in 5.25-5.5% range and a 30% chance for it going an extra 25 bps higher by July .
Implications For Crypto
This could be a major medium-term headwind for crypto as continuous increase in interest rates could lead to market instability which would affect crypto prices negatively as well as reduce liquidity among investors due to less money available on credit markets or other financial instruments like mortgage loans etc., making it harder for businesses and individuals alike who want access capital through cryptocurrencies or other digital assets..
Upside Risks To The Inflation Outlook
The FOMC members noted that upside risks remain a key factor shaping policy outlook and warned that “insufficiently restrictive” stance could hamper progress on bringing down inflation, which makes it clear why they are taking steps towards increasing interest rates even though economy still hums along nicely and inflation may remain hot for comfort..
Overall, latest information regarding upcoming rate hikes from Federal Reserve points towards possible negative implications for crypto currencies such as instability or reduced liquidity among investors due to less money available on credit markets or other financial instruments like mortgage loans etc., which may hinder businesses and individuals alike who want access capital through cryptocurrencies or other digital assets..