Bitcoin and the broader crypto market stuttered after the United States Federal Reserve (FED) hiked interest rates by 25 basis points (bps) or 0.25%. The latest hike took the benchmark interest rate target to a range of 4.5% to 5%, signaling a continued effort by the apex bank to tame inflation.
Following Wednesday’s announcement, Bitcoin struggled to hold on to $28,000, dropping as low as $27,200. The wider market also saw a mixed reaction, although the market capitalization held steadily above $1.8T.
The Fed continued its interest rate hike despite recent banking turmoil, which saw Silvergate, Silicon Valley and Signature bank liquidated. The interest hike was synonymous with its hike in January, where it also increased interest rates by 25bps.
Fed Chair Jerome Powell, during the FOMC meeting, also stated that the US Central Bank is not done with its price hike until inflation reaches its target figures. He noted that the Fed remains attentive to inflation and would use interest-rate tools to deal with inflation while using its balance sheet to address financial stability issues.
Powell stated that the banking system is safe now, noting it was on its way to a terminal rate rise before the bank run kicked in. According to the Federal Reserve’s banking chief, a possible credit tightening will mean less work for monetary tightening.
Just As Predicted
The Fed interest rate hike turned out as analysts had speculated. In the wake of the recent banking turmoil, economists projected a quarter-rate hike as the Fed looked to smoothen the ride for banks.
Meanwhile, the U.S. Consumer Price Index (CPI) came in strong earlier in the month, signaling inflation is yet to be tamed. The cost of used cars, housing, and energy in the US increased slightly in February, a sign the Fed is lagging behind its target inflation figures.
