Rate Hikes Will Continue but Peak This Year, Fed Minutes Show

Central bankers see more interest rate hikes, and recent economic data backs them up

February 22, 2023 02:35 pm

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Crypto faltered and stocks traded sideways after Federal Reserve minutes revealed the central bank has more room to hike interest rates to combat rampant inflation.

“All participants” see interest rate increases continuing in order to ease financial market conditions, the minutes, released Wednesday, show.

Bitcoin (BTC) and ether (ETH) trended lower on the news, dropping 2.3% and 2.5%, respectively. Stocks were more steady, with the S&P 500 and Nasdaq Composite indexes inching 0.2% and 0.5% higher in the moments after the release.

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Bitcoin was still hovering below $24,000 Wednesday afternoon in New York, failing to break a key resistance level analysts are watching.

“If the $25,500 is reached, momentum traders might try to support a rally towards the psychological $30,000 level,” Edward Moya, senior market analyst at Oanda, said in a note. “If bearish momentum returns, Bitcoin has strong support at the $22,500 region.”

At its Federal Open Market Committee meeting on Feb. 1, the Fed opted for yet another interest rate increase — the central bank’s eighth consecutive move.

“The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time,” FOMC members wrote in a statement at the end of their two-day policy meeting.

In the weeks since the Fed’s meeting, economic data has not shown signs of hitting the key levels Fed Chair Jerome Powell has insisted upon seeing. Inflation remains persistent, with economists fearing a plateau may have been reached. And a hot labor market shows consumer spending is strong.

The Fed is next scheduled to meet in March and will release its latest interest rate decision on March 22. Until then, investors will be watching for jobless claims and inflation readings.

As of Wednesday, futures markets were still pricing in a 76% chance of a 25 basis point increase in March, according to data from CME Group.

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