Powell shared that the current inflation rate in the US stands at over 2%, which he admits is a high number. He also noted that globally, the inflation rate is well above the US.
The efforts that the government needs to take in order to slow the inflation include raising interest rates and softening labor conditions, likely causing “some pain” to the economy, Powell added.
“Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy,” the Fed Chair insisted.
Powell assured that The Federal Reserve System is ready to “use our tools forcefully” to fight inflation, which is at the highest level the country has seen in 40 years.
He also encouraged businesses to accept the existing inflation and take necessary measures to adjust their business models to the current market conditions.
The markets did not take the news of raising interest rates well. The Dow Jones Industrial Average fell by 611 points (1.85%) during and right after the Fed Chair’s speech. NASDAQ, the US stock exchange, lost 2.7%, while the stock market index S&P 500 lost 2.2%.
The entire US stock market is in the red at the time of writing, with major tech companies like Microsoft, Tesla, Apple, and Amazon losing up to 4% in market capitalization.
Crypto markets have reacted to the news in a similar manner – with losses.
The entire cryptocurrency market capitalization plummeted from over $1 billion before the speech to $955 million right after.
Bitcoin (BTC), the leading cryptocurrency, dropped below $21,000, losing around 2% in the past hour and trading at $20,642 at press time.
Ethereum (ETH), the second biggest cryptocurrency by market cap, saw its price losing slightly over 1% – down to $1,575.
Coins that have seen the biggest losses over the past hour include OKB, Cosmos (ATOM), Nexo (NEXO), and Huobi Token (HT), with their prices falling up to 3%.
Historically, crypto markets behaved pretty independently from major political and financial news, but over the past two years, the markets have become more correlated, shaking the belief that Bitcoin is a great hedge against inflation.
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