On Wednesday, the Federal Reserve intensified its fight against high inflation by raising its benchmark interest rate by three-quarters of a point, the highest increase since 1994. The Fed also indicated a future rate hike as it works to reduce inflation without triggering it. recession.
But the reality came out a day later.
Stocks fell on Thursday in response to investors’ realization that the economy would be hit by higher interest rates and greater risk of recession as a result of the Fed’s tougher stance.
Altcoin Daily’s Austin is analyzing the general crypto market, the FOMC meeting, and its impact on the crypto bear market, as well as what to expect from the July Fed meeting.
BTC Staggers But Comes Back Quickly
BTC fell to $20K after news of a three-quarters percent increase. Soon after Fed Chairman Jerome Powell’s announcement, the price started rising again.
Jerome Powell clarified that rates will be increased rapidly in the future. All eyes are on the Fed meeting in July, their most aggressive increase in history, after the Fed announced a 75 bps increase. There is a strong indication that inflation will decline and eventually reach 2%.
The Fed believes that continuing rate hikes are justified. However, incoming data and changing economic projections affect how quickly such adjustments are made.
“It is clear that today’s increase of 75 bps is exceptionally high, and I do not expect to see many increases in this size in the future. So, as of the current situation, the most likely increase in our next meeting is either 50 bps or an increase of 75 bps points”.
Jerome cautioned that despite the sharp increase, there will probably be another significant increase of 50 or 75 basis points next month. This suggests that the market suppression will continue in the future and is probably the only way to avoid skyrocketing inflation this year.
The Youtuber pointed out another essential thing: how close are we to mitigating that inflation?
Richard Fischer, the former chairman of the Dallas Federal Reserve, has been making this kind of discussion for years, and the analyst likes his point of view. He claims that “inflation isn’t going anywhere anytime soon” because “he’s talking to a lot of private companies who are saying they’re not moving under prices because they can’t afford it right now.”
Fisher continued by saying that he does not believe the Fed’s four percent interest rate hike will be enough to curb inflation. Instead, according to their forecasts, it will need to move further in the coming months.
Another 75BP in July with year-end rates of 3.5-3.75%
According to analysts, there is a downside risk to the Fed’s forecasts for a rate hike. The supply side of the economy must better balance with strong demand in order to bring down inflation sharply.
But given the geopolitical setting, COVID containment measures in Asia, and labor shortages in the US, it doesn’t look like this will happen very soon. As a result, the Fed will need to tighten demand by monetary tightening as inflation is likely to get slower and slower.
Then, we expect a 50bp change in September and November, followed by a 25bp increase in December. This would represent the Fed’s most aggressively tightening path since 1988 and is closer to where the market is pricing it. These measures will be complemented by the bank’s plans for quantitative tightening.
So it can be called a short term crypto bear market rally. As the analyst concludes, this bear market will not end until the Fed decides to begin easing, which they estimate will happen at the end of the third quarter.