Federal Reserve Raises Interest Rates, Another Hike Possible in September

• The Federal Reserve raises rates by 25 bps.
• Inflation remains elevated, the labor market is strong.
• Further rate hike possible in September.

In a widely anticipated move, the US Federal Reserve has increased interest rates by 25 basis points (bps). This brings them to their highest level in 22 years at 5.25-5.5%. Fed Chair Jerome Powell makes an additional statement in a post-policy announcement. He says that the central bank is keeping its options open for further rate hikes. However, this will depend on incoming US economic data.

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In detail, analysts believe this could be the last interest rate hike in the current tightening cycle. In contrast, others think the Fed may remain on a “hawkish hold” until 2024 before considering a rate cut.

Despite the potential for future hikes, US money markets are now pricing in a strong likelihood of a rate cut in September. The money market-implied probability of a 25 bps interest rate cut back to 5.0-5.25% surged from zero to 78% following the Fed’s announcement.

In particular, US yields and the US Dollar Index (DXY) slipped slightly in response to the news. Meanwhile major US equity benchmarks like the S&P 500, Nasdaq 100, and Dow Jones Industrial Average remain mostly flat.

As for the crypto market, prices were choppy but currently stand higher in comparison to pre-Fed policy announcement levels. Bitcoin (BTC) was trading around $29,500, up approximately 1% on the day. 

Likewise Ether (ETH) recorded a little over 1% gains, hovering in the upper $1,800s. Notably, Solana (SOL) was the standout performer among the top 10 cryptocurrencies by market cap, surging nearly 10% on the day.

Bitcoin is currently retesting resistance at $29,500, and a break above this level could pave the way for further gains toward the 21-day moving average (DMA) just above $30,000. The medium-term technical outlook for BTC remains positive, as it continues to trade in a strong uptrend for 2023 and remains well above its 200 DMA.

Source: cryptonews.com

As the market digests the implications of the Federal Reserve’s decision and closely monitors economic data, investors in both traditional markets and cryptos are bracing for potential impacts on their portfolios. The crypto market, which has experienced increased volatility in recent times, remains influenced by macroeconomic factors and the evolving regulatory landscape.

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