Stocks and Bitcoin Rally After The Fed Raises Rates the Most in 22 Years

The Federal Reserve raised rates by half a point—the biggest single-meeting increase in 22 years. Fed Chair Jerome Powell said in the news conference that additional half-point rate increases will “be on the table at the next couple of meetings,” he added that officials aren’t actively considering a 75-basis-point increase.

Powell pledged to fight inflation, citing strength in wage growth and the labor market. Officials are “strongly committed to restoring price stability,” he said.

Bank of America strategists wrote that Powell’s comments were less hawkish than feared, and that investors should now pay closer attention to economic data than Fed messaging.

“We believe the Fed has pivoted to an appropriately hawkish stance and is likely done surprising markets for a while,” they wrote. “We recommend focusing more on the data flow going forward, especially around labor and inflation.”

The Nasdaq Composite closed with a 3.2% gain, while the S&P 500 rallied 3%, and the Dow Jones Industrial Average advanced 932.27 points, or 2.8%.

The Federal Open Market Committee also announced a smooth path to wind down its $8.4 trillion balance sheet. It will allow $30 billion in Treasuries and $17.5 billion in mortgage-backed securities on its balance sheet to mature over the next three months, and then $60 billion and $35 billion a month after that, respectively. 

Matt Senter, CTO & Co-founder of Lolli, the leading bitcoin rewards app, commented on the Fed's recent decision to boost interest rates in response to rampant inflation. He believed The Fed’s decision to boost interest rates in an aggressive push to scale back rampant inflation reflects the dire state of the American economy. 

He said, "The argument for bitcoin grows stronger by the day. Bitcoin, as a hyper-secure store of value and global currency, cannot be manipulated by a third-party authority and is thereby free from inflationary pressures. An increasing number of countries are legalizing bitcoin as a currency, embracing its ability to strengthen financial infrastructure, facilitate wealth creation, and afford direct access to financial resources. With the devaluation of the US dollar due to inflation, we are now finding ourselves in the perfect storm catalyzing global mainstream adoption of bitcoin as an anti-inflationary, disintermediated alternative to our legacy financial system in crisis.”

Goldman Sachs said, "A fourth 50 basis point rate hike is possible in September too, but we are maintaining our forecast that the FOMC will revert to 25 basis point hikes at that point until we see additional data".

As of writing, Bitcoin rose toward $40,000. Most cryptocurrencies traded higher over the past 24 hours, tracking moves in stocks. Meanwhile, gold ticked higher as the U.S. dollar declined.

By Amy Liu

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