On Wednesday, the U.S. Federal Reserve announced it would keep interest rates near zero, even as it comes closer to removing some of the extraordinary stimulus provided to financial markets since the Covid pandemic started.
According to a statement from the Fed’s monetary-policy panel, the Federal Open Market Committee (FOMC), the benchmark U.S. short-term interest rate will stay in its current range of between 0% and 0.25%,
In a separate statement the Fed also announced it intends to “significantly” reduce the size of its balance sheet “in a predictable manner”.
At a press conference, Fed Chair Jerome Powell said:
“The balance sheet is substantially larger than it needs to be. There’s a substantial amount of shrinkage in the balance sheet that needs to be done.”
According to Powel, inflation might not be going back to pre-pandemic levels any time soon. He warned:
“There’s a risk that the high inflation we are seeing will be prolonged. There’s a risk that it will move even higher. So, we don’t think that’s the base case, but, you asked what the risks are, and we have to be in a position with our monetary policy to address all of the plausible outcomes.”
The crypto community is closely monitoring the Fed’s movements. According to analysts bitcoin’s price could see a reaction in response to Fed decisions. Stripping away monetary accommodation has the tendency to put downward pressure on asset prices that are considered high risk, which include cryptocurrencies and stocks.
Bitcoin’s price briefly went up 2.5% after the decision was announced on Wednesday afternoon before losing the gains again. The top cryptocurrency is currently moving hands at $36,134.96 according to CoinMarketCap data.
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Source: Igaming
