See More

Fed Increases Interest Rates by 25 Basis Points, Suggests Rate Hike Pause Likely

2 mins
Updated by Kyle Baird
Join our Trading Community on Telegram

In Brief

  • U.S. Federal Reserve Chair Jerome Powell said that the bank had decided to increase interest rates by another 0.25%.
  • Powell said the collapse of several banks has driven a more cautious approach, with a rate hike pause imminent.
  • U.S. Treasury Secretary Janet Yellen's speech after the Fed announcement saw Bitcoin fall below $27,500.
  • promo

The Federal Reserve has increased the federal funds rate by 25 basis points, causing the S&P 500 to rise 0.3% and the Dow to increase by one-tenth of a percent.

The latest increase takes the interest rate between 4.75% and 5%, with the Fed predicting that failures of several U.S. banks would induce a slowdown in spending and economic growth.

Fed Changes ‘Ongoing Increases’ Narrative

After the news, Bitcoin rose slightly from $28,400 to $28,585, while ETH increased from $1799.21 to $1,811.01.

Notably, the central bank changed its position on the pace and aggression of further increases, suggested Chairman Jerome Powell at an appearance before Congress earlier this month. Replacing the phrase “ongoing increases” with “additional policy firming” suggests that the central bank may pause increases at future meetings.

Federal Reserve interest rate
U.S. Federal Funds Rate | Source: TradingEconomics

The Fed also predicted slower U.S. economic growth in 2023.

Notably, the interest rate decision was taken without considering the U.S. Personal Consumption Expenditure Index, the Fed’s preferred inflation gauge, for Feb. 2023. The PCE will be released on March 31, 2023.

Powell’s Semiannual Monetary Policy Report to Congress on March 8, 2023, suggested that a tight U.S. labor market could result in continued aggressive monetary policy tightening that would increase the central bank’s terminal rate. The terminal rate is the interest rate that would take inflation down to the Fed’s 2% target.

Bank Failures Tie Hands of Federal Reserve

The Federal Reserve started increasing interest rates in the U.S. about a year ago, with four consecutive increases of 0.75% sparking rumors of a recession.

Powell said the recent collapses of Silicon Valley and Signature Bank also influenced the size of the 25 basis point hike.

The Federal Deposit Insurance Corporation placed both banks into receivership earlier this month amid a flurry of withdrawals that tested the firms’ risk management.

Shortly after Powell’s press conference, U.S. Treasury Secretary Janet Yellen said the FDIC would not provide a higher limit to backstop bank deposits.

After Yellen’s speech, Bitcoin dropped to roughly $27,000 before rebounding to $27,505. ETH fell to $1,728 but has since recovered to $1,747.

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here.

Top crypto projects in the US | July 2024
Harambe AI Harambe AI Explore
Uphold Uphold Explore
Exodus Exodus Explore
Coinbase Coinbase Explore
Chain GPT Chain GPT Explore
Top crypto projects in the US | July 2024
Harambe AI Harambe AI Explore
Uphold Uphold Explore
Exodus Exodus Explore
Coinbase Coinbase Explore
Chain GPT Chain GPT Explore
Top crypto projects in the US | July 2024

Trusted

Disclaimer

In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.

David-Thomas.jpg
David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...
READ FULL BIO
Sponsored
Sponsored