Crypto market has been negatively impacted by the tightening of the United States Federal Reserve. Bloomberg Analyst McGlone stated earlier in the month that Bitcoin would surpass traditional stocks as interest rate rises. However, to this point, Bitcoin does not seem to follow Bloomberg’s predicted trend.
As a matter of fact, despite Bloomberg’s bullish standpoint, Bitcoin and other cryptocurrencies are still in a crash. For example, BTC and ETH dropped by 2% after the Fed’s announcement and bounced back. However, they have crashed yet again. BTC trades at $19,000 currently
The Fed Reserve’s Federal Open Market Committee manages the economy during inflation and recession by controlling the money supply in the country. Through quantitative tightening, the Fed keeps money supply in check by easing reserves. Volatility in the market is triggered by an increase in interest rates.
Federal Reserve: Inflation would drop to 2% in 2025
The Federal Reserve revealed its plans to tackle inflation at Thursday’s Federal open market committee meeting. Fed plans to hike rates up as high as 400bps in 2022.
The CPI reported 8.3% YoY inflation in August. However, the Federal Reserve predicts that inflation will fall to 2% by 2025. Fed Reserve expects inflation to fall to 5.4% and 2.8% respectively by 2022-2023. Reports show that Fed raised this year’s interest benchmark by four times. Current rates range from 2.25% up to 2.50%.
From the CNBN Fed Survey for September, Fed’s interest hike would remain at the peak rate for 11 months. John Ryding is the chief economic advisor of Brean Capital.
Ryding claimed that Fed officials have finally grasped the critical nature of inflation. He thinks the Fed’s monetary tightening rate is a ‘positive real policy rate.’ The economist advises Fed to increase the current rate by 5%.
Survey respondents included economists, strategists and managers of funds who believed that Fed may overdo its tightening.
Recession Would Hit Global Economy – World Bank
According to the World Bank, recession will hit global economies due to warlike monetary policies.
Northman Trader founder Svan Henrich believes that interest rates will be affected more by recessions than inflation over the following year. Jerome Powell, the Fed Reserve Chairman, is a model for Paul Volcker, according to Henrich. Henrich also advised Powel not to move before the target rate of 40bps. Paul Volcker was the ex-Chief of the U.S Fed Reserves.
Jerome refused to say much about the recession, saying he didn’t know the depth or when the recession would occur. Fed dismissed any rumors of recession.
All are eagerly awaiting the September inflation data from the Consumer Protection Index. The Federal Open Market Meeting for November 2nd will also be held.
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