• The markets had largely priced the change in, analysts say, but persistent inflation could move cryptos to the red
  • The central bank also opted to raise rates 75 basis points in June

The Federal Reserve doubled down on its newfound quantitative tightening policy making Wednesday, bumping interest rate by three-quarters of a percentage point. 

The US regulator cited continued upward pressure on inflation and robust job growth. The move marks the central bank’s fourth consecutive rate increase, a strategy it hopes will curb the highest inflation in more than four decades. 

Overall economic activity appears to have slowed a bit, Fed officials wrote in a statement released at the end of their two-day policy meeting, pointing to reduced spending and business production statistics. 

Job gains have been robust in recent months, and unemployment has remained low, the statement noted, but the war in Ukraine and ongoing supply chain issues have contributed to persistent higher prices. 

In June, when the central bank also opted to raise rates 75 basis points, Fed Chair Jerome Powell called the move “unusually large,” but if current conditions persist, higher increases could become the norm. 

“The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals,” the statement said. “The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.” 

Crypto markets reacted well to the news, which analysts say was mostly priced in. Bitcoin and ether gained 1.6% and 2.3%, respectively. The S&P 500 and tech-heavy Nasdaq were largely unchanged — but remained in the green by mid afternoon trading.

“This 75 [basis point] rate hike was previously telegraphed and came as expected, further stoking fears of a slower, longer hike cycle rather than the quicker one preferred by many,” said Steven McClurg, co-founder and chief investment officer at digital asset fund manager Valkyrie Investments. “Most traders are likely to take risk off the table as they head off on vacation for the rest of the summer, and the markets will slowly grind down on thin volumes with a lack of upside catalysts though at least the next FOMC meeting in September.”

It’s hard to predict which market moves might come next, other analysts say. 

“We could see a relief rally because the market has priced in such a move already,” Anthony Denier, CEO of trading platform Webull, said. “But, it could also fall if investors believe the Fed still isn’t getting inflation under control and this could mean more big hikes in the near future.”

This is a developing story.

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  • Blockworks
    Senior Reporter
    Casey Wagner is a New York-based business journalist covering 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]