Bitcoin Up as Fed Announces 0.75 basis point rate hike

US interest rates have returned to pre-pandemic levels as the Fed tries to tackle skyrocketing inflation rates.

Fed fights inflation with 0.75% rate hike

The Federal Reserve has raised interest rates by another 75 basis points.

The central bank announced the development at Wednesday’s Federal Open Market Committee meeting. Following the 0.75% increase, US interest rates are currently between 2.25% and 2.5%, the highest level since the start of the COVID-19 pandemic.

The Fed’s decision came after the US Bureau of Labor Statistics revealed that the consumer price index had risen to one 40-year high of 9.1% in June despite the central bank’s months-long effort to curb rising prices with interest rate increases. The agency’s report said gasoline, shelter and food price increases were the biggest contributors to the increase.

The latest move by the Fed comes as a growing number of Americans express fear of high rates. According to a recent CNBC opinion poll, 96% of citizens are “concerned” about the price increases for food, gas and shelter.

To combat inflation, the Fed may attempt to contract the money supply. It does this by raising interest rates, which makes it more expensive to borrow money. The 75 basis point increase was widely expected, although there was speculation that the central bank could opt for a 100 basis point increase shortly after June inflation data dropped.

“Inflation has obviously surprised to the upside over the past year, and further surprises may be in store,” Federal Reserve Chairman Jerome Powell said at the post-meeting news conference. While he stated that it would “be appropriate to slow the pace of increases,” he added that the central bank would consider “an even larger” increase if necessary in the future.

Recession fear loom

The Fed’s efforts to curb inflation come as uncertainty reigns across global markets and fears of a possible recession escalate. The Bureau of Economic Analysis’ GDP printout showed the US economy shrank by 1.6% in the first fiscal quarter, and many economists fear the economy could slow in the second quarter. A recession has historically been identified by two consecutive quarterly declines in GDP.

Q2 pressure drops tomorrow, and the White House has apparently prepared the public for the announcement ahead of time. Last week it was published a blog post on the matter, before sharing an interview transcript in which Treasury Secretary Janet Yellen argued that two consecutive quarters would not indicate the country was in a recession because the Bureau of Economic Analysis looks at “a wide range of data.” President Biden said Monday that the United States is “not going to be in a recession” in response to a reporter’s question about tomorrow’s GDP print, and yesterday his economic adviser Brian Deese repeated Yellen’s argument in the White House press office.

The crypto market reacted positively to the news, with both Bitcoin and Ethereum jumping following the Fed’s announcement. Bitcoin passed $22,000, up 5% in the last 24 hours. Ethereum reached around $1,550, up 11.6% on the day. After the latest rally, the global cryptocurrency market cap has once again topped $1 trillion.

This story is breaking and will be updated as more details emerge.

Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.