Bitcoin Remains Stable as Fed Announces Biggest Rate Increase Since 1994
Bitcoin briefly spiked 4% in the news to immediately abandon that gain
The US Federal Reserve has raised its benchmark interest rate by 75 basis points, the largest increase since 1994.
Bitcoin, the world’s largest cryptocurrency, changes hands for $20,889 on the Bitstamp exchange. The largest cryptocurrency briefly peaked at more than 4% in the news, but immediately wiped out those gains.
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The US dollar index rose to 105.79 after the announcement.
The Fed was widely expected to raise interest rates more aggressively after the consumer price index (CPI) posted a year-over-year increase of 8.6%, which was a significant upside surprise to the market.
The increasingly aggressive central bank’s policies are widely believed to be the main headwind for risky assets like Bitcoin.
In its statement, the Federal Open Market Committee (FOMC) said it remains committed to cooling inflation, pointing to a faster pace of rate hikes. This percentage is expected to rise to 3.8% next year. Federal Funds rate futures estimate another 75 basis point rise in July.
Central bankers see inflation falling to 5.2% by the end of 2022 and finally approaching the target of 2% in 2023.
Speaking at a news conference, Fed Chair Jerome Powell said the central bank had the necessary tools to restore price stability. However, the central bank continues to see upside risks to inflation. “We at the Fed understand the hardships caused by high inflation. We are determined to push inflation back and we are doing everything we can to do it quickly,” Powell said.
The Fed chief says the pace of rate hikes will depend largely on incoming data.