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Crypto Market Remains Muted Post Federal Reserve Quarter-Point Interest Rate Hike

2 mins
Updated by Kyle Baird
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In Brief

  • The Federal Reserve has once again raised interest rates in an effort to curb inflation.
  • Interest rates have now reached the highest levels in 16 years.
  • All major stock indices sank briefly soon after the Fed announced the rate hike, garnering a mixed reaction for crypto markets.
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The U.S. Federal Reserve has once again raised interest rates in an effort to curb inflation. The crypto market had a mixed reaction to the hike.

The interest rates reached the highest levels in 16 years after the central bank raised its benchmark rate a quarter percent to 5.1%.

Fed Hike Takes Rates to 16-Year High

All major stock indices sank soon after the Fed announced the rate hike. Crypto, however, showed a mixed reaction. In the last 24 hours, Bitcoin and Ethereum have gained 2% after a minor dip post-announcement. Other major altcoins remain muted on the hourly charts. The broader market largely looks unchanged after a short pullback.

The decision is the result of the still high inflation, which has slowed down in the past months. Consumer inflation in the U.S. decreased in March but remained at 5%. The year-over-year rate is significantly less than the 6% seen in February.

Experts interpret the 25 basis point increase, which brought interest rates to their highest level in 16 years, as a hint of a potential pause at the next meeting.

What’s Coming for the Markets?

Some analysts previously predicted that the Fed would pause its exercise to tighten monetary policy amid a banking crisis. However, in a recent review by the Board of Governors of the Federal Reserve System, the Silicon Valley Bank failure was pinned on ‘mismanagement.’ Moreover, the review called the U.S. banking system “sound and resilient, with strong capital and liquidity.”

Federal Reserve Chair Jerome Powell Speaks After Interest Rate Hike | CNBC

Federal Reserve Chair Jerome Powell touched upon the crisis in a press conference following the interest rate hike. He said,

“The run on Silicon Valley Bank was out of keeping with the speed of runs through history. And that now needs to be reflected in some way in regulation and in supervision.”

However, economists are concerned that ten rate hikes in one year may cause the economy to slow down or even trigger a recession. Regional U.S. banks may be exposed to systemic risks as a result of the increase, according to banker Uday Kotak of Kotak Mahindra Bank. A recent report highlights that the uninsured depositors at the roughly 190 regional banks are still withdrawing money, stressing the system. This could be a possible reason the crypto markets didn’t take the news too badly.

Meanwhile, the Hong Kong Monetary Authority (HKMA) also increased interest rates on Thursday.

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Shraddha Sharma
Shraddha is an India-based journalist who worked in business and financial news before diving into the crypto space. As an investment enthusiast, she has also has a keen interest in understanding crypto from a personal finance standpoint.