Fed Hikes Interest Rates by Another 75 Basis Points - Crypto Briefing

Interest rates have returned to pre-pandemic levels as the Federal Reserve attempts to tackle soaring U.S. inflation rates. 

Fed Fights Inflation at Risk of Recession

The Federal Reserve has hiked interest rates by another 75 basis points. 

The central bank announced the development at Wednesday’s Federal Open Market Committee. After the 0.75% increase, U.S. interest rates are currently between 2.25% and 2.5%, the highest level seen since the beginning of the COVID-19 pandemic. 

The Fed’s decision came after the U.S. Bureau of Labor Statistics revealed that the Consumer Price Index had risen to a 40-year high of 9.1% in June despite the central bank’s months-long efforts to curb soaring prices with rate hikes. The bureau’s report said that gasoline, shelter, and food price rises were the biggest contributor to the rise. 

The latest move from the Fed comes as growing numbers of Americans express fears over soaring prices. According to a recent CNBC poll, 96% of citizens are “concerned” about the food, gas, and shelter price rises. 

To fight inflation, the Fed can attempt to contract the money supply. It does so by raising interest rates, which makes borrowing money more costly. The 75 basis points hike was widely expected, though it was speculated that the central bank could opt for a 100 basis points hike shortly after the inflation data for June dropped.

The Fed’s efforts to curb inflation come as uncertainty prevails across global markets and fears of a possible recession escalate. The Bureau of Economic Analysis’ GDP print showed the U.S. economy shrank by 1.6% in the first financial quarter, and many economists fear that the economy could post a decline in the second quarter. A recession has historically been identified by two consecutive quarterly declines in GDP. The print for Q2 drops tomorrow, and the White House has seemingly been preparing the public for the announcement in advance. Last week, it published a blog post on the matter, before sharing an interview transcript in which Treasury Secretary Janet Yellen argued that two consecutive quarters would not indicate that the country was in a recession because the Bureau of Economic Analysis looks at “a broad range of data.” President Biden’s economic advisor also reiterated Yellen’s argument in the White House’s press office yesterday.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.