Jerome Powell, the Chair of the Fed recently admitted that high fund rates will not stop inflation. At the Senate Banking Committee hearing yesterday, Elizabeth Warren questioned Powell on the hike in interest rates.
Warren asked if the decision made by the Fed last month would suppress the price of groceries, food, and other necessities. Giving an honest answer, Jerome Powell clearly stated that the hike could not stop the increase in the price of goods and services. Warren further warned the Fed’s Chair to exercise caution in increasing interest rates.
The decision of the Fed to raise interest rates was supposedly made to boost the strength of the US economy. However, the rate hike has not gone down well with many individuals, and the US economy may see negative results in the coming months.
The Crypto Market Suffers From the Fed’s Decisions
The Fed has been increasing interest rates since the start of the year, and the crypto market seems to be feeling the effect too. The latest increase in rates happened in mid-June, as the rate was increased by 0.75 percentage points.
This hike has discouraged venture capitalists from pumping money into the economy and stock market as higher interest rates indirectly increase the risks of investing. The crypto and stock markets experienced severe declines in March, May, and June. Most stocks are 20% down from their peaks, and cryptocurrencies are even further down.
Notably, suppression of interest rates could have encouraged borrowing and investments during this market turmoil. However, unfavorable market conditions have left investors drawn back. The unfavorable market has also affected several crypto institutions. Coinbase recently laid off 18% of its workforce while ByBit sent 2000 staff packing this month.
Although Bitcoin and other cryptocurrencies are currently trading at price levels perceived to be a discount, potential investors are far from calm. The Fed has been unable to contain rising inflation and this raises fear of a further economic meltdown. Current economic conditions have left US residents and citizens of other nations expectant of another global recession in the coming months.
