The U.S. Federal Reserve is still battling with inflation as the Consumer Price Index (CPI) for September rose 0.4%, beating the estimates of 0.3% from economists. We also saw this upward inflationary trend play out last month as the September CPI also rose 3.7% versus forecasts of 3.6%.
These CPI numbers sent a ripple effect in the Crypto market as the Bitcoin (BTC) price continued to push lower. The BTC price is right now trading around the $26,760 price level, a 1.5% push down following the news.
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How Will The Feds React
The minutes released from the most recent meeting of the U.S. Federal Reserve’s Federal Open Market Committee (FOMC) held yesterday, saw policymakers in agreement on the need to hike interest rates at least one more time before the end of the year.
Analysts are predicting this next rate hike could come in November at the next Fed meeting.
The goal is to bring the Fed’s fund rate to between 5.25% to 5.5%. This will effectively be the highest level of borrowing cost in the last two decades.
Why are The Feds Planning to Hike Rates This Much?
The U.S. Federal Reserve uses interest rate hikes among other tools in its arsenal to regulate the economy and keep it functioning as optimal as ever.
Since the Fed’s started hiking rates in March 2022, we have seen the US inflation drop from a 40-year high of 9.1% to 3.67%. But this is still above the Fed’s 2% target, so for now we expect more hawkish tones till at least the end of the year in a bid to finally achieve this goal.
How is This Rate Hike Affecting The Crypto Market
Rate hikes have a notable impact on cryptocurrencies as it changes investors’ behavior and market dynamics.
When there is a rate hike, low-risk investment opportunities like bonds and fixed-income assets become more attractive to investors (higher interest means more money made from these assets).
This could easily lead to an outflow of capital from volatile assets like Crypto causing a decrease in demand and a potential price correction or even sell-off.
What Is Bitcoin Doing Right Now?
Just like the whole crypto market, Bitcoin is reeling from these high CPI numbers and Rate Hikes.
The BTC price is right now ranging in the Daily timeframe, with Bitcoin traders cautious of how this news will affect market volatility in the coming days.
We believe there is a very high probability that this Bitcoin-ranging phase might go on for a while as the market continues to digest this hawkish monetary policy stand taken by the Fed.
A further rate hike could easily see the BTC price deep even more aggressively in the coming weeks.
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