After the intensely-discussed Federal Open Market Committee meeting of January 31st and February 1st concluded, FED announced it would raise interest rates by another 25 basis points. The decision brings the target range to 4.5-4.75% and indicates that the FED, while still hawkish in its effort to combat inflation, is willing to offer the market some respite in 2023.
FED Announces First Interest Rate Hike of 2023
As the first Federal Open Market Committee Meeting of 2023 concluded this Wednesday, the FED announced it would be hiking interest rates by 25 basis points. The decision, widely anticipated by economists across the board, brings the target rate up to between 4.5% and 4.75%.
While the market has been in a slight decline in anticipation of the decision, it failed to make a decisive turn in the immediate aftermath of the announcement. After the long and dramatic decline in stock and digital assets prices throughout 2022, The first month of 2023 presented a rally across the board and even became Bitcoin’s second-best January in the last ten years.
Previously, FED officials predicted they would raise interest rates just above 5% and there is a wide consensus that 2023 will see only one additional hike of 25 basis points. Despite the general expectations of a gentler central bank this year, it is important to remember that its Chair Jerome Powell has remanded adamant the FED will not stop until inflation is down to 2%. January’s CPI data is scheduled to be released on February 14th, and the next FOMC meeting will be held in late March and deliver the new decision on interest rates on the 22nd.
FED Raised Interest Rates 7 Times in 2022
As 2022 proved a year of immensely high inflation—standing at 6.5% annually—with its record month of June reaching troubling 9.1%, it is hardly surprising that the FED has been very aggressive with rate hikes throughout it. No fewer than seven FOMC meetings delivered increases bringing the rate from close to 0% to just under 5%.
The seven increases contained five 75 BPS hikes between June and November. The year, however, ended with a slightly less aggressive 50 basis points jump as 2022’s last CPI proved better than was widely anticipated. Furthermore, in an address to the Brookings Institute in late November, FED’s Powell took a more dovish approach but remained adamant that his agency would not stop the tightening until the inflation cools down to 2%.
Inflation has also remained very high across the globe throughout 2022 with the Eurozone rate reaching a historic high of 9.1% in September. The crypto markets have also been heavily impacted by the broader economic situation bringing the sector’s total market cap below $1 trillion—a value it had reclaimed only in January.
This article originally appeared on The Tokenist
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