Fed raises interest rates again: What this means for Bitcoin
The Federal Reserve (Fed) raises the key interest rate for the fourth time since the beginning of the Corona pandemic, this time by 0.75 bps. The Bitcoin price reacts instantly to the strong increase.
Target range for federal funds rate increases to 2.25% to 2.50%
The Fed announced that the key interest rate will be raised by 0.75 bps to a range of 2.25% to 2.50%. In June, the Fed had already raised the key interest rate by 0.75 bps in a historic step. Now the interest rates continue to rise.
Combating historically high inflation
In a official statement, the Federal Open Market Committee summarizes the decision as follows:
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent and anticipates that ongoing increases in the target range will be appropriate.
The US inflation rate of 9.1% has indeed reached a historic level. A week ago on 21 June, the European Central Bank (ECB) also announced a similar step, raising the key interest rate in the euro area “only” to 0.5% with inflation at 8.6%.
At a press conference following the Fed meeting, Federal Reserve Chair Jerome Powell even announces the possibility of further interest rate increases:
JUST IN: 🇺🇸 Federal Reserve Chair Jerome Powell says #inflation is too high and another unusually large rate increase could be appropriate at next meeting.— BTCATH (@btcathcom) July 27, 2022
Bitcoin price reacts instantly
While raising the key interest rate is an effective instrument to fight inflation, stagnating or even declining economic growth is accepted in return. Unlike after the ECB’s interest rate increase, the Bitcoin price reacted instantly to the Fed’s announcement. Initially, the Bitcoin price showed a positive reaction. The Bitcoin price climbed above the $22,000 mark again, trading at $22,472 on Wednesday evening. The next hours and days will show whether the Bitcoin price can stabilize above $22,000 or move in the other direction.
This article does not provide investment advice. Historical cryptocurrency data is not a guarantee of future market developments. The author may hold several of the cryptocurrencies mentioned in this article.
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