The United States Federal Reserve has again raised interest rates to fight inflation. A 0.75% point increase takes the lending rate to 2.25-2.50%.
The United States Federal Reserve has once again increased interest rates by 0.75%. The central bank cited weak economic data behind the growth, and its official said it would continue to fight the worrying inflationary trend.
The United States is currently facing its worst inflationary trend in decades, as global macroeconomic trends do not look positive for many countries. The US is not the only country facing high inflation, and countries around the world are struggling to keep the issue under control.
Federal Reserve Chairman Jerome Powell said that “it doesn’t mean America will be in recession” and outright said he doesn’t think America is in recession. Lending rates now range between 2.25% and 2.50%.
Powell also said that there could be another hike in September. In the announcement, the central bank said,
“Recent indicators of expenditure and production have softened. Nonetheless, job gains have strengthened in recent months, and the unemployment rate remains low. Inflation remains high, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices and wider price pressures.”
The Federal Reserve says it is focused on returning to the 2% objective. Meanwhile, consumers and markets will face uncertain times going forward.
Consumers will bear the brunt of the impact
Meanwhile, consumer prices have picked up this year. The US Consumer Price Index reached 8.55% in March 2022, and this increase in prices can be seen in many countries.
FTX CEO Sam-Bankman Fried has also said that the main reason for the crypto market crash was the rise in interest rates. However, he did not criticize the Fed and said that they are in a difficult position. The Fed is not alone in this action, as have other officials, including in India.
Can crypto deliver on its promise as a hedge?
Crypto has long been regarded as a hedge against inflation. This is the reason why many big companies have invested in crypto. Many people continue to do so despite the ups and downs in the market.
But over the past two years, the narrative has weakened, as crypto and the broader global markets have begun to show a strong correlation. Some investors looking for safe assets in uncertain times have turned away from more volatile assets like crypto.