The Federal Open Market Committee (FOMC) of the Fed steers the economy through periods of inflation and recession as it uses quantitative tightening and reserve easing to sustain the money supply. Therefore, a rise in interest rates caused market volatility.
At the FOMC meeting on Thursday, the Federal Reserve discussed its strategy for tackling inflation. The Fed aims to raise interest rates by 400 basis points by the end of 2022, so an increase of 75 basis points is just the beginning.
The CPI showed 8.3% year-over-year inflation in August, although the Federal Reserve expects inflation to decline to 2% by 2025. By 2022 and 2023, the Fed Reserve hopes to reduce inflation to 5.4% and 2.8%, respectively.
According to reports, the Fed has increased the benchmark interest rate four times this year. Currently the rates range from 2.25% to 2.50%.
According to the September CNBN Fed Survey, the Fed’s interest rate hike would last 11 months at its highest level. Brean Capital’s Chief Economic Advisor, John Ryding, made a comment in response to the poll.
According to Riding, the Fed now understands how serious the inflation crisis is. The Fed’s monetary tightening rate is, in his opinion, the “positive real policy rate”. The Fed is advised by economists to raise the current rate by 5%.
According to the study, several economists, strategists, and fund managers—35 in total—believe the Fed may have gone too far with its tightening.
bitcoin hits a downward rout
Earlier this month, Bloomberg analyst Mike McGlone McGlone predicted that bitcoin would outperform traditional equities when interest rates rise. But at the moment, bitcoin is not showing a trend in the direction indicated by Bloomberg.
In actuality, Bitcoin and other cryptocurrencies are still in a fall despite Bloomberg’s upbeat outlook. For instance, after the Fed’s announcement, BTC and ETH fell by 2% before rising again. The price of BTC is currently less than $19,000.
