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Crypto markets cheered the Fed announcement surging by more than 4% and crossing above the $1 trillion valuations once again.
On Wednesday, February 1, the Federal Reserve finally announced a 25 basis points rate hike taking the interest rates to 4.75%, the highest in nearly 15 years. The rate hike was quite on the expected lines and Fed Chairman Jerome Powell hinted at future rate hikes ahead this year.
New Rate Hike by Fed
Over the longer run, the Fed aims to achieve maximum employment and bring inflation under its target of 2%. In its effort to reach those goals, the central bank will continue increasing rates. during his press conference on Wednesday, Fed Chairman Jerome Powell said:
“The labor market continues to be out of balance” adding that “substantially more evidence” will be needed to “determine that inflation is on a sustained downward path.” Powell also added that a “disinflationary process has started,” and “it’s at an early stage.”
This 25 basis points rate hike already marks a slowdown from the pace of the previous rate hikes. Throughout the last year of 2022, the Federal Reserve continued with its rate hikes of 50 to 75 basis points.
Powell added that “shifting toward a slower pace, will better allow the committee to assess the economy’s progress to our goals. We continue to anticipate that ongoing increases in the target range of the federal funds rate will be appropriate”.
Is a Recession Coming or Will the Fed Pivot?
Some experts in the market believe that the Federal Reserve could pivot from its rate hike monetary policy despite Powell hinting at more rate hikes. But others believe that if the Fed continues with its actions, a recession could be imminent. Speaking to CNBC, Bill Zox, portfolio manager at Brandywine Global said:
“I’m not sure the Fed is even trying for a soft landing. While they would never say so, they might prefer the restorative aspects of a recession and a proper bear market.”
Amid the Q4 corporate earnings, the stock benchmarks have got some boost with some companies announcing resilient profits. Shares of Advance Micro Devices (NASDAQ: AMD) humped by more than 12% on Wednesday amid a strong earnings beat. Yesterday, the S&P 500 index ended 1% higher at 4,119.21.
Similarly, the broader cryptocurrency market is up by more than 4% and is currently trading above 41 trillion. Bitcoin’s (BTC) price is up by more than 3% and is currently trading at $23,821 with a market cap of $459 billion.
The altcoin space is also showing up major gains with Ethereum (ETH), Cardano (ADA), and Polygon (MATIC) up by 5-12% respectively.