Fed interest rate indecision is weighing on markets; stocks, gold and cryptocurrencies work in the fall

The Federal Reserve, popularly referred to as the Fed, met this Wednesday (23) to discuss the next decisions of its monetary policy. Undecided and citing the possibility of further rate hikes, the Fed pressured markets.

While the S&P 500, the index that aggregates the 500 largest US companies, is down 0.9% this Wednesday, gold fell 1.4% over the same period.

Bitcoin was the hardest hit, posting 4% losses as it hit $26,000. Other cryptocurrencies followed the bearish move, including the also giant Ethereum.

Fed prepared to continue rate hikes

Dollar inflation has already shown a major improvement since the start of monetary tightening by the US Federal Reserve. However, despite the increase from 9.1% to 4.9%, there is still a long way to go before the Fed’s target of 2% a year is reached.

When asked if the Fed will continue to raise interest rates or if that hike will come to an end, Jerome Powell shocked the markets with his answer.

“If we have to raise interest rates, we will”Powell replied to an Associated Press reporter. “We know that could have an effect on macroeconomics, on demand, on the labor market, on inflation, and we’ll look to see what those are.”

“So we’ll look at all those things and eventually, of course, we’ll come up with a policy that’s tight enough to bring inflation down to 2%.”

In short, the rise in interest rates aims to make it more difficult to get credit, resulting in less money circulating in the economy. A measure to cool it down after misuse of economic incentives offered by the government in recent years.

Consequently, such monetary tightening weakens the economy, leading to massive layoffs, bank failures and even the risk of a recession, which is reflected in the speculative market. In any case, Powell and his team seem to have only one goal: to bring inflation down to 2% per year.

The next Fed meeting is scheduled for June 14

On the other hand, Jerome Powell also pointed out that recent inflation data could lead the Fed to halt rate hikes. However, it is still too early to dream of a reduction, even with the consequences.

“Inflation and labor market crossover data came in stronger than expected and indeed, prior to recent events, we were clearly on track to continue with continued rate hikes”noted Powell. “In fact, until a few weeks ago, it looked like we might have to raise rates over the course of the year more than we anticipated in December. [do ano passado].”

The next Fed meeting is scheduled for June 14, in which the US BC is allowed to change interest rates again. In any case, we can expect rates to remain high, even without further increases, throughout 2023. Therefore, Bitcoin, gold and stocks face challenges.

Source: Live Coins

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