Bitcoin’s price fluctuated after the Federal Reserve announced further monetary tightening on June 15, falling to as low as $20,270 after the Fed’s statement. But an hour after the announcement, the cryptocurrency was traded at $21,444.
As a long-awaited step, the Fed announced that it will raise the fed-funds rate, the interest rate at which depository institutions trade balances held at the central bank, by three-quarters of a percentage point, or 75 basis points.
According to Fed Chairman Jerome Powell, members of the Federal Open Markets Committee said the inflation surprise on the upside warranted “strong action at this meeting” rather than waiting another six weeks for the FOMC’s next gathering.
“We decided we needed to go ahead, and so we did,” Fed Chairman said. “We came to the view that we’d like to do a little more front-end loading on that.”
It’s noteworthy that the rate hike is the Fed’s highest since 1994 and underscores the inflationary pressure on the US economy.
The fed-funds rate will rise to a range of 1.5%-1.75%. In the long term, committee members expect the benchmark interest rate to go up to 3.4% this year and to 3.8% in 2023, according to the “dot plot,” a pictorial representation of Fed officials’ projections for the central bank’s key short-term interest rate published every quarter.
Following the decision, Bitcoin fell over 5% but rebounded during Powell’s press conference, where he said that the Fed would boost rates by a half-point or three-quarters of a point at each of its next two meetings.
“Markets loathe uncertainty and unpredictability,” Valkyrie’s head of research Josh Olszewicz told CoinDesk. “Digital assets have significantly correlated with US financial markets in recent months, both of which have continued to bleed lower. A decrease in downward volatility will only likely be achieved with a pause or reversal of the current Fed policy and direction.”
Stocks also moved up following the Fed statement. The S&P 500 rose 2.1%, and the Nasdaq gained 3.3%.