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Crypto and Stock Markets Slide as Fed Signals More Rate Hikes Coming

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Crypto and Stock Markets Slide as Fed Signals More Rate Hikes Coming
  • FOMC not expected to raise rates another 75 basis points, but futures markets still split
  • Staff also lowered their growth forecasts for the second half of 2022 and 2023 again – despite a rebound in gross domestic product growth in the second quarter

The Fed is expected to raise interest rates again, as preliminary efforts by the U.S. regulator have yet to stem inflation, according to minutes released Wednesday.

The Federal Reserve agreed at a meeting in July that rates were to rise 0.5% in September, according to the minutes. Cryptocurrency traders have been watching the Fed’s moves closely this year amid market turmoil.

“The projection of U.S. economic activity prepared by staff for the July FOMC meeting was significantly weaker than the June forecast, reflecting reduced momentum in the economy and current and future financial conditions that were expected to provide less support for aggregate demand growth,” said the minutes said.

Futures markets are now pricing in a 53% chance of a 50 basis point hike and a 48% chance of a 75 basis point hike next month.

Growth forecasts for the second half of 2022 and 2023, meanwhile, have been revised downwards, despite a rebound in gross domestic product growth during the second quarter.

At the July 26-27 political committee meeting, the central bankers chose to increase interest rates by 75 basis points again, a hike that Fed Chairman Powell previously called “exceptionally large.”

“Obviously, today’s 75 basis point increase is unusually large, and I don’t expect moves of this magnitude to be common,” Powell said at the time.

Wednesday’s minutes, however, show officials could lean toward another 75 basis point increase at the Sept. 20-21 meeting.

CPI lower than expected report Starting in July, crypto and equity markets rebounded, but the Fed’s preferred gauge of inflation, the Personal Consumption Expenditure Price Index, won’t be released until later this month.

“Most market participants appeared to view moderating inflation and slower, but still positive, economic growth as the most likely scenario,” the minutes read. “However, investors appeared to be increasingly alert to downside risks to the economy in light of the potential for shocks from abroad and lingering surprises on the upside in inflation.”

The shares fell slightly on the news. The S&P 500 lost 0.6% and the Nasdaq slipped 1.1% towards the end of the trading day, while bitcoin fell 1%.

“Technical analysis tells us that bitcoin will face a critical test over the next few days as the 200 weekly moving average sits just below the current price of $23,700 at around $23,000 – failing that. to maintain this level, it will suggest that there are further downsides to come in the following weeks and the market reversal could be delayed,” said Marcus Sotiriou, analyst at GlobalBlock.

Corporate earnings will also play a role in future market moves, Tom Essaye, founder of Sevens Report Research, wrote in a note Wednesday.

“The market will want to see more good earnings and guidance from the remaining major retailers due to today’s quarterly earnings release, as well as a set of not-as-hawkish-as-dreaded Fed minutes released this afternoon if this latest leg higher in equities is going to continue,” Essaye wrote. significantly positive new catalyst.”


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  • blockages

    Senior Reporter

    Casey Wagner is a New York-based business journalist who covers regulation, legislation, digital asset investment firms, market structure, central banks and governments, and CBDCs. Prior to joining Blockworks, she reported on markets at Bloomberg News. She graduated from the University of Virginia with a degree in media studies. Contact Casey via email at [email protected]

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