• The Federal Reserve made a decision to increase the interest rate by 25 basis points on Wednesday, which notably affected the price of Bitcoin by causing it to pump $300 within 5 minutes.
• Former Richmond Fed President Jeffrey Lacker asserted on Tuesday that further rate hikes are necessary in order to meet the 2% inflation target set by the Fed.
• Despite fears surrounding the US banking sector, markets had widely anticipated this month’s hike, though they had priced in a 16% likelihood of no rate hike occurring.
Fed Hikes Interest Rates By 25 Points
The Federal Reserve (Fed) has increased its policy interest rate by 25 basis points on Wednesday, taking it up to a range of 4.75%-5%. This decision was made as part of an effort to quell inflation, with CPI inflation having clocked in at 6% in February. Despite fears surrounding the US banking sector, markets had widely anticipated this month’s hike, though they had priced in a 16% likelihood of no rate hike occurring.
Bitcoin Price Pumps After Announcement
The announcement notably affected the price of Bitcoin, which pumped $300 within 5 minutes of being announced. Bitcoin started trading at $28,216 before reaching up to $28,417 ahead of FOMC and then breaking upwards again to $28,752 following the interest rate decision – where it currently trades for around $28,480 at writing time. According to Coinglass there were also around $19.64 million in liquidations within 1 hour after the announcement was made.
Further Rate Hikes Necessary To Reach 2% Inflation Target
Former Richmond Fed President Jeffrey Lacker claimed on Tuesday that further rate hikes are necessary if we are going to reach the 2% inflation target set by the Fed and that there is still room for further tightening with regards to economic conditions.
US Banking Sector Remains “Strong And Resilient”
Despite concerns about instability amongst many US banks due partly induced by rising rates causing bond prices to crater – The Fed has continued with their plans and have declared that the country’s banking system remains „strong and resilient“.
Markets Anticipate Further Hikes In Coming Months
Going forward many believe that more hikes could occur throughout 2021 as The Federal Reserve continues its inflation fight – with markets expecting further increases throughout coming months as part of this process.