The FED and Spiralling Inflation

The US Federal Reserve (FED) holds eight meetings a year. Last month they announced that they would use the six remaining FOMC meetings to combat spiraling inflation.

• The first of the six major FOMC meetings concluded in early May when interest rates increased by 50 basis points, which was the highest hike in the last two decades.
• Yesterday on the 15th of June, the second of the six major FOMC meetings concluded with the FED voting to raise interest rates by 75 basis points.
• The market expected an increase, and this hike was the largest move in a single FOMC meeting since 1994.
• Consumer Price Index (CPI) inflation accelerated to a 40-year high of 8.6% in May, currently sitting more than four times the FED’s long-run inflation target of 2% a year.
• FED officials are now projecting a year-end rate of 3.4%, far exceeding the initial projections of 1.9% from March.

 Tip: Each basis point is 1/100th of 1%, meaning a 50 basis point increase would equate to a move of 0.5%.

How will this likely affect the crypto markets? 

• The market was expecting a 75 basis point increase. According to CoinGecko, 24 hours after the announcement, BTC increased by 5.0%, ETH increased by 9.7%, and the total crypto market cap increased by 4.5% to $952 billion.
• After last month’s FOMC meetings, the crypto market experienced a minor pump. However, this seemed to rally a higher low to liquidate shorts before dumping further.

Current macro conditions continue to worsen, making it increasingly difficult to predict market movements. To help you navigate the volatile market moves, check out our guide on ‘How To Thrive In a Bear Market’.