The US central bank forecasted higher interest rates than investors had anticipated, reaching 5.1 percent in 2023 according to recent reports. The US Federal Reserve increased interest rates on Wednesday by half a percentage point and forecasted that borrowing costs would increase by at least another 0.75 percent by the end of 2023, along with an increase in unemployment and a nearly stopping of economic growth.
The prediction by the US central bank that the target federal funds rate will increase to 5.1 percent in 2023 is marginally higher than what markets anticipated going into this week’s two-day policy meeting, and it appears to be skewed upward.
90% of the fed members predict an increase in interest rates
Only two of the 19 Fed members predicted the benchmark overnight interest rate would remain below 5% in the coming year, indicating they will continue to take aggressive action to combat inflation, which has been running at 40-year highs.
After a meeting when authorities backed down from the three-quarters-of-a-point rate rises that were provided at the previous four sessions, the revised statement was published. It was unanimously agreed. The Federal Reserve’s goal range for its policy rate, which was near zero at the start of the year, is now 4.25 percent to 4.5 percent, the highest level since late 2007.
How this will impact crypto
Crypto assets had previously been thought of as an inflation hedge, but recently they have behaved more like conventional risk assets, including equities. Future crypto asset prices will be hampered by higher rates
In fact, like with other risky assets, cryptocurrencies fell when the Fed declared in November 2021 that it intended to raise rates, and they continued to decline throughout 2022 as the Fed firmly implemented its plan. Additionally, traders’ faith in these digital assets has been severely shaken by high-profile crashes of specific cryptocurrencies and exchanges like FTX hence this could see a more enormous impact on crypto.
In his press conference after the FOMC meeting, Fed Chair Jerome Powell stated that the rate of rate increases is less important currently. Still, he added that he is not yet ready to state that recent positive inflation news indicates a peak in price pressures. Powell said that the main issue facing policymakers right now is where the Fed pauses and how long it stays there, adding that how quickly we go is not as crucial. These recent revelations place the FED in the spotlight again, just after Elon Musk expressed recession worries recently.
