Last night Jerome Powell spoke about the state of the economy. The words of the director of the US Federal Reserve were lenient, and the market has taken this positively. His lenient words could mean that interest rates will not rise as fast as expected next month.
Interest is important for Bitcoin price
Yesterday we wrote that Jerome Powell would give a speech on the state of the economy. The speech by the director of the US Federal Reserve plays a major role in how fast interest rates will rise in December. The higher the inflation rate, the more interest rates have to rise to curb it.
Shortly after his speech, Bitcoin quickly rose above $17,000 and major stock indices celebrated. It’s been almost a year since Powell had something positive to say about the economy.
Don’t fight the FED
In the years after the great financial crisis devastated the global economy in 2008, Wall Street adopted an old mantra: “Don’t fight the FED.”
Bitcoin is actually the weapon to fight the FED, but that does not seem to apply to Bitcoin’s price. Not just Bitcoin, but the entire crypto market seems unable to fight with the FED.
It has been clear over the past year that when Powell started talking about aggressively raising interest rates, the crypto market entered a bear market.
Bitcoin fell from $69,000 to $15,000 as the dollar strengthened as interest rates moved up. This also applies the other way around, of course, when the corona pandemic started and the global economy was locked, central banks lowered their interest rates, which brought new money onto the market very cheaply.
Bitcoin also benefited from this by rising from USD 3,000 to USD 69,000.
Interest rate hikes are moderated
Yesterday, Powell said the central bank would slow its aggressive rate hikes starting from its upcoming December 14 meeting.
“It makes sense to moderate the pace of our rate hikes as we approach the level of restraint that will be enough to bring inflation down,” Powell said. “The time to moderate the pace of rate hikes may come as early as December’s meeting.”
Stocks and crypto are jubilant
The markets responded well to his words, so Bitcoin rose above $ 17,000. Ethereum quickly rose 6% and other altcoins were also able to write green numbers again.
The Dow Jones Industrial Average closed 2.2% higher, the tech-heavy Nasdaq climbed 4.4% and the S&P 500 added 3%.
Powell also said the job was not done yet. He reiterated that while interest rates may not go up as fast, they will not go down either.
It is likely that restoring price stability will require policy to be kept at a restrictive level for some time. History warns strongly against premature policy easing. We’ll stay on track until the job is done,” Powell concluded.
We continue to monitor the market and the decisions of the main Central Banks. The next Fed meeting will be on December 14.