The Fed announced its highly anticipated interest rate decision. Here is the initial reaction of the leading cryptocurrency Bitcoin. The Fed increased interest rates by 75 basis points. Expectations were 75 basis points. Bitcoin’s initial reaction was as follows.
A new statement was included in the text of the FED’s interest rate decision. This statement was interpreted as a slowdown in interest rate increases, and an upward move came in Bitcoin and US stock markets. The paragraph added to the text is as follows:
“The Committee will take into account the cumulative tightening of monetary policy, the delays in monetary policy’s impact on economic activity and inflation, and economic and financial developments, while determining the pace of future rate hikes.”
The Fed was expected to raise interest rates by 75 basis points on Wednesday, then signal it could reduce the size of rate hikes from December. As markets prepare for their fourth consecutive 75bp increase, investors expect the Fed to slow its pace before ending its rate hike cycle in March. One basis point is equal to 0.01 percent of a percentage point.
Michael Gapen, chief US economist at Bank of America, said:
“We think they increased it just to reach the end point. We estimate that they increased it up to 75. We think they opened the door to a step back in interest rate hikes as of December.”
Gapen said he expected Fed Chairman Jerome Powell to state at the press conference that the agency discussed slowing the rate of interest rate hikes, but was not committing to doing so. Gapen expects the Fed to raise interest rates by half a point in December. Gapen continued his thoughts before the interest rate decision as follows:
“The November meeting isn’t really about November. It’s about December.”
Gapen expects the Fed to raise rates to 4.75% to 5% in the spring, which will be the final rate. An increase of 75 basis points on Wednesday will increase the interest rate range from zero to 0.25% in March to 3.75% to 4%. The stock market had already risen on expectations of a slowdown in the agency’s rate hikes after a recent 75 basis point hike Wednesday afternoon. However, the Bitcoin price was resisting just above $20,000 before the interest rate decision. It has also been found that US crypto investors continue to buy Bitcoin lately. Despite various setbacks, US investors have accumulated more Bitcoin since July of this year than anywhere else.