Federal Reserve Raises Fed Funds Rate Over 5% for First Time Since 2007

eToro’s Callie Cox noted that bitcoin has led the stock market “in seven of the last 10 Fed days”

article-image

Federal Reserve Chair Jerome Powell | Source: JAndrea Hanks "Jerome Powell" (CC license)

share

The Federal Reserve announced a 25 basis point hike on Wednesday, raising the federal funds rate between 5% and 5.25% for the first time since 2007. 

The 25 bps hike was largely expected, though the hike comes after a slew of bank collapses. In the past couple of months, JPMorgan had to step in to buy First Republic after it was seized by regulators, Silicon Valley Bank was abruptly seized by regulators after comments from the CEO caused a bank run, Signature followed SVB’s suit a few days later and Silvergate — which had a lot of crypto exposure — voluntarily liquidated back in March.

The Fed omitted language that signaled further rate hikes, pointing to a potential pause. 

Federal Reserve Chair Jerome Powell said the Fed will be “prepared to do more” if economic activity calls for it. 

“We’ll be driven by incoming data, meeting by meeting,” Powell said when asked whether or not the Fed would pause rate hikes in future meetings. “Our future policy actions will depend on how events unfold.”

“The committee will closely monitor incoming information and assess the implications for monetary policy. In determining the extent to which additional policy may be appropriate,” the Fed said in its May release.

In March, Powell said that it was “too early” to fully understand the effect of the banking crisis, and in the May decision, the Fed reiterated that the “banking system is sound and resilient.” 

Powell addressed the banking sector, saying that the Fed will be closely monitoring the banks.

If the Fed starts to cut rates by the end of 2023, then the market “has already priced it, and it is very likely the Fed will manage a soft landing, and financial markets will continue to grow. In case of some deviation in the plan, the risk of a recession or a longer period of high inflation will be increased, which can lead to the market drop,” Ruslan Lienkha, chief of markets at YouHodler, said in an email to Blockworks. 

In March, Powell also reiterated that he believed that there was a possibility for a soft landing — a term he’s been using since the Fed started on its rate hiking cycle to indicate the possibility of lowering inflation without an economic crisis or recession.

While inflation has shown signs of slowing, it’s still persistently high. The consumer price index’s annual inflation found that prices rose 5% for the 12 months ended in March, which is a slight downtick from the 6% reported in February.

However, the Federal Reserve’s goal is to bring inflation back to a 2% target rate, which is also the fed funds’ target rate. 

“We’re highly attentive to the risks that high inflation poses,” Powell said.

Bitcoin “is driven by macro events this year, with a +25bps hike priced in, there should be little reaction there,” said Greg Magadini, director of derivatives at Amberdata, a crypto analytics firm. “Guidance around a pause going forward should be bullish for BTC and could send BTC slightly higher (around 29k-30k) but without a surprise, I don’t expect $30k to be meaningfully surpassed.”

Callie Cox, US investment analyst at eToro, noted that bitcoin (BTC) has outperformed the stock market “in seven of the last 10 Fed days.”

Loading Tweet..

Updated May 3, 2023 at 3:01 pm ET: Added additional context throughout.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Unlocked by Template.jpg

Research

Uniswap v4 redefines DEX infrastructure by transforming the protocol into a fully customizable, developer-first platform. With hooks, developers can build tailored AMMs, dynamic fees, MEV capture, and more. Paired with its singleton architecture and flash accounting, v4 slashes gas costs by over 99% and reintroduces native ETH trading. Early projects are already showcasing what’s possible, signaling Uniswap’s shift from AMM to a programmable platform.

article-image

Sponsored

Offering reduced risk with next-generation, security-first diversification and carbon-negative staking

article-image

Could crypto disintermediate DC lobbyists?

article-image

The resale exchange has expansion plans involving fan perks

article-image

Tariffs are now live and being collected. But what does data say about their initial impacts on the economy…and who’s footing the bill?

article-image

Bitkraft Ventures’ Carlos Pereira and Matt Halstead share their predictions for blockchain gaming

article-image

Industry watchers are keeping an eye on how the US securities regulator handles proposals to expand index fund holdings beyond BTC and ETH