The US Federal Reserve has raised the US federal funds rate by 75 basis points to 2.5%.
Wednesday’s verdict was predictable, with the market pricing in a rise of 75 basis points ahead of time. The move is projected to fight inflation, which hit a 40-year high of 9.1% in June. Investors had placed a one-in-four chance of 100 basis points prior to this; though, this was priced out earlier in the week.
Today’s increase takes the Fed’s rates to the level that policymakers formerly have said denotes the neutral rate — the rate which supports maximum employment in the economy, while keeping inflation persistent.
The price of bitcoin hopped up 3.31% on the news, having traded close to $21,500 prior to the declaration. At the time of writing, bitcoin is trading hands at about $22,000 according to CoinGecko.
Wall Street firms were forecasting an 89% chance of a 75-basis point increase, whereas most commentators shared parallel views.
Barclays bank forecasted this hike following June’s CPI report. The investment bank said at the time, that with “inflation surpassing expectations on the heels of the strong June employment report, we now expect the FOMC to hike the target range for the fund’s rate by 75 basis points at its upcoming meeting on July 26-27.”
The bank assumes another aggressive rate hike in September, with the terminal rate hitting 3.25-3.5% by the end of the year.
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