On July 27th, the Federal Reserve of the United States (Fed) made a significant decision after a two-day FOMC meeting. They raised the interest rates by an additional 0.25%, bringing it from 5.25% to 5.5%. This move pushed borrowing costs and the federal funds rate to the highest level in over 22 years.
The reason behind this action is to pursue the Fed’s inflation target of 2%. It was widely predicted by experts and the financial markets, and many analysts even speculated that this could be the last interest rate hike for now. The Fed is likely to pause and assess the impact on the economy.
However, the Fed emphasized that if achieving the 2% inflation target faces obstacles, they are ready to implement additional measures. They will determine the appropriate interest rate level to bring inflation back to the target based on a comprehensive evaluation of monetary policy, its timing impact on economic activities and inflation, as well as overall economic and financial developments.
During the post-FOMC press conference, Jerome Powell, the Fed Chairman, reiterated familiar themes about carefully considering the current rate increases before continuing with further hikes.
The 2% inflation target set by the Fed is seen as an ideal rate to encourage spending and investment while maintaining stable and consistent growth. The decision to raise interest rates started in March 2022 from nearly 0%, with a rapid increase throughout the year, followed by slower adjustments in 2023 and a pause in June.
At the time of the interest rate announcement, the cryptocurrency market showed a slight recovery, with Bitcoin increasing by 1.5% to $29,690 before settling around $29,370 currently. Overall, Bitcoin displayed relatively lower volatility compared to previous interest rate announcements, indicating that the macroeconomic data from the U.S. is gradually losing its impact on the cryptocurrency market.