Market Recap: Fed Holds Rates Near Zero, For Now

key takeaways

Fed Chair Jerome Powell’s remarks on the Fed policy caused some volatility in the markets
The Fed’s statement notes that it will keep the Federal Funds rate between 0% and 0.25% until further notice

Today

Fed Chair Jerome Powell held a press conference today regarding the Federal Open Market Committee's (FOMC) meeting about policy changes in light of increased inflation. Markets were significantly volatile with bitcoin jumping as much as 5.3% in the moments leading up to the meeting only to fall into the red after the meeting.

In a similar fashion, the S&P 500 jumped as much as 0.70% just before the meeting only to drop in the negative later in the day.

[stock_market_widget type="accordion" template="chart" color="#5679FF" assets="BTC-USD,SPY" start_expanded="false" display_currency_symbol="true" api="yf" chart_range="1mo" chart_interval="1d"]

Newsletter

Subscribe to The Breakdown

Traders and investors had been anxiously awaiting the Fed's plans for the federal funds rate. While the Fed had already announced that it would stop asset purchases by March, many expected the Fed to begin increasing rates immediately given increased inflation. Instead, Powell revealed that the Fed would keep interest rates the same for the time being.

"The committee left the target range for the federal funds rate unchanged, and reaffirmed our plan announced in December to end asset purchases in early March. In light of the remarkable progress we've seen in the labor market and inflation that is well above our 2% longer-run goal," said Powell during the press conference.

Though rates will remain unchanged right now, Powell did mention that the Fed would look to increase them along the same timeline that it intends to cease asset purchases.

“I would say that the committee is of a mind to raise the federal funds rate at the March meeting, assuming that conditions are appropriate for doing so,” said Powell

An increased federal funds rate following a period with very low rates has historically correlated with down markets. This is because lower rates add more capital to markets while higher rates dry up capital, clenching down on the amount of risk investors are willing to take and how much they want to be exposed in the market.

Tomorrow

Upcoming earnings reports to watch out for tomorrow are Mastercard (MA) and Visa (V), both of which have become more involved in the cryptocurrency space in the last year.

Mastercard is expected to report earnings before market open while Visa is expected to release earnings after market close. Investors should expect volatility to remain high for the foreseeable future as the Fed gears up to hike rates.

[stock_market_widget type="accordion" template="chart" color="#5679FF" assets="MA,V" start_expanded="false" display_currency_symbol="true" api="yf" chart_range="1mo" chart_interval="1d"]

Get the news in your inbox. Explore Blockworks newsletters: