Hawkish Fed Powell Crashes Markets – Bitcoin Magazine
The Federal Open Markets Committee, the US central bank’s body responsible for setting monetary policy, raised interest rates by 75 basis points on Wednesday for the fourth time in a row as Federal Reserve governors try to fight stubborn inflation in the country.
Jerome Powell, chairman of the Federal Reserve and FOMC, joined a group of reporters at a press conference shortly after the data release, shedding more light on the central bank’s thoughts for future action.
Markets reacted positively to the 0.75% interest rate hike, which came in as expected, but trading became more volatile as the chairman began his speech. While the written statement announcing the interest rate decision featured another dovish phrase, further fueling the rally, Powell’s news conference combated that sentiment as the Fed chief reiterated earlier guidance.
“In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” the FOMC statement said. suggesting a more dovish Fed.
However, Powell highlighted that “the final level of interest rates will be higher than previously expected”, triggering an acute market decline.
The sentiment that markets are left with is confirmation that a decline is near but surprising in the case of the terminal fund rate, as evidenced by the rise and subsequent decline in the S&P 500 index.
The S&P 500 shot up at 14:00 EST (2:00 p.m.) as soon as the FOMC statement was released with the more dovish language, only to come back down as Powell’s press conference began thirty minutes later. Investors likely left the live stream with a sour taste in their mouths, judging by the continued declines in the index. (Chart/TradingView)
Bitcoin mirrored movements in the stock market, albeit falling less in percentage terms. At the time of writing, BTC is accumulating a 1% move, while the S&P 500 ended the trading day with over double that amount (2.39%). The Nasdaq saw a similar fate, but extended losses to 3.15%.
The fact that Bitcoin has been the least volatile of the three is quite remarkable as it totally defies history and mainstream media narratives. While the peer-to-peer currency is still correlated with stocks, it is not the one that makes the most severe swings and it goes unnoticed.
