The Federal Reserve has raised its benchmark rate again to between 5% and 5.25% as announced on Wednesday.
Bitcoin prices remained relatively stable upon the announcement, fluctuating between $28,000 and $28,500.
- The market had already predicted the increase, with an 11.8% chance that the Federal Open Markets Committee (FOMC) would maintain the current rate, as per the CME FedWatch tool.
- The central bank has been increasing its interest rate since last year in an effort to address the surge in consumer price index inflation which had reached a high of 9.1% in June 2022.
- BitMEX co-founder Arthur Hayes and others predicted that the Fed might stop raising rates, or even begin lowering them sooner than expected after multiple bank failures prior to the previous rate hike in May.
- However, former Richmond Fed Chief Jeffrey Lacker assumed that the Fed would still push through with rate hikes to signal the banking system’s resilience, rather than risk alarming the market.
- As of March 2023, inflation has gone down to 5%, but some remain skeptical due to the Federal Reserve’s efforts to protect the banking system, which has already poured billions of dollars back to the economy.
“The U.S. banking system is sound and resilient,” said the Fed in its press release with the rate increase announcement. “Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation.”
- The central bank further announced that it will adapt monetary policies “if risks emerge that could impede the attainment of the Committee’s goals.”