The United States Federal Reserve has increased interest rates by half a percentage point. Inflation is hitting the U.S. hard, and the central bank is looking at ways to stymie its effect on the country.
The United States Federal Reserve has raised interest rates by a half-point, as the country grapples with high levels of inflation. This rate hike is the largest since 2000, and the central bank had not raised the rate by more than a quarter-point since that year. It will also reduce its asset holdings, including Treasury securities and agency debt, and agency mortgage-backed securities.
Like many other countries, the U.S. is facing a high inflation rate that is gravely affecting average citizens. India, for instance, has also raised its repo rate by 40 bps to 4.4% to combat inflation.
The Consumer Price Index is at 8.55%, the highest it has been in decades. This index measures the weighted average price of consumer goods and services, including food and transportation.
The Federal Reserve could even raise interest rates even higher in the future. Speaking on the nature of the times, the Federal Reserve said,
“The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain. The invasion and related events are creating additional upward pressure on inflation and are likely to weigh on economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is highly attentive to inflation risks.”
Could crypto be the savior to inflation woes?
Inflation has long been a concern for the U.S. economy and a sizable portion of the investing community, including those in the crypto community. In fact, inflation has been one of the major reasons behind the flux of investment into the crypto market. Peter Thiel, among many other notable figures, has spoken about how high inflation rates would lead to more investments in crypto.
Crypto could be the beneficiary of these rate hikes. Speaking on CBDC, Paul Tudor Jones said that crypto could have a bright future as the rate hikes take effect. This seems to be the general sentiment among analysts and experts.
However, it’s worth bearing in mind that the independence of the crypto market has diminished somewhat in the past two years. The crypto market has become more strongly correlated with the S&P 500 and big tech firms. Those claims saying that crypto could be a hedge against inflation are losing their strength.