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- The Federal Open Market Committee’s half-a-percentage point increase in fed funds rate came after four months of 75 bps hikes.
- The Federal Reserve is also projecting an additional 75 bps increase in borrowing cost by the end of 2023.
- Bitcoin price shot up by 3.39% on Wednesday at one point following the decision before declining to $17,822.
Bitcoin price, along with the rest of the crypto market, noted a strong reaction after the Federal Open Market Committee (FOMC) meeting on Wednesday. The Federal Reserve’s decision to taper the pace of the federal funds rate hike was received positively, but the increase nonetheless did not sit well with most people.
Federal Reserve rate hike takes a hike
The Federal Reserve (Fed) announced on December 14 that the federal funds rate would be increased by 50 basis points (bps). The FOMC’s decision came in as per expectations, marking a deviation from the last four months of 75 bps increase. Commenting on the rise, the FOMC said,
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 4-1/4 to 4-1/2 percent.”
The Federal Reserve is projecting another 75 bps increase in borrowing costs by the end of next year in addition to a near stalling of economic growth.
The FOMC further stated that it is still committed to bringing the Personal Consumption Expenditures (PCE) inflation to its 2% objective. As per the Committee, the ongoing increases in the target range will be helpful in creating the right monetary conditions to bring inflation to 2% over time.
FOMC’s federal fund's rate hike came a day after the Consumer Price Index (CPI) data was released. The Bureau of Labor Statistics noted a 7.1% increase for the month of November, which was lower than the expected 7.3%.
Bitcoin price makes a move
Bitcoin price did react to the FOMC’s decision but did not take any particular direction. Following the announcement, the prices spiked, and BTC rose by 3.39% to trade at $18,373. However, this rise did not sustain for a long time as hours later, the king coin came tumbling down back to $17,822.
Total Crypto Market Capitalization
The rest of the crypto market reacted similarly as the total market capitalization increased to $848 billion before declining to its current value of $824 billion. Going forward, positive cues are necessary to drive recovery, as the crypto market has only improved by some 10% in almost a month.