Usually, when the Federal Reserve chairman speaks following another consecutive FOMC meeting where the decision to combat elevated inflation rates by raising the federal funds rate is made, the market responds by doing the same and tightening its belt. That, however, was not the case this week, when on Friday, just two days following the fourth consecutive increase of 75 basis points instituted by the Federal Open Market Committee, the digital assets market experienced a surge along with the S&P 500, Nasdaq and DOW Jones Industrial Indexes.
First Brief Consolidation, And Then There Was A Surge
The very next day following the Fed meeting the markets were relatively quiet and traded mostly sideways. But shortly after 10 am eastern time on the second day after the meeting and press conference, the price of Bitcoin could be seen surging past the psychological barrier of $21,000. It’s something the number one digital asset by total market capitalization was able to do just a week ago on October 30, yet without holding the price level beyond a 24-hour period.
Back on September 12, the last significantly pressurized BTC surge, saw the coin elevate not only past $21,000 but also beyond the $22,000 price level, only to fall back under $20,000 only two days later. The $21,000 price level has remained a target for bullish BTC traders and investors since.
Mixed Sentiment Over Chairman Powell’s Remarks And Latest Jobs Report
In the course of his address to the room of journalists and reporters, Fed Chairman Powell seemed to be extremely selective with each one of his words, as he meticulously produced every last one of them with a heightened degree of thoughtfulness. Individuals, investors, businesses, government officials and others were keenly attentive to every word and the mannerisms of the Chairman in an attempt to gather further sentiment about what to expect with future rate decisions.
Federal interest rates to come, beginning with the next FOMC meeting on December 14, made up a considerable portion of many of the deeper conversations that took place in the week leading up to this past meeting. Mixed sentiment was reflected across the global financial markets, which experienced uptrends on the days preceding Wednesday’s meeting.
It seems that the market had already accounted for the news of another aggressive rate hike, as the percentage of votes which reflected a belief that interest rates would increase by the .75% rate stood at over 90% by the day of the meeting, and was over 80% for several days prior. For that reason, several financial experts have pointed to other factors that may be playing on the positive responses seen in the market.
The US jobs report posted positive numbers as more than 261,000 jobs were created according to data published in the monthly detailed report. Employers are still hiring, and salaries are competitive, which is believed to possibly be contributing to the challenges, as apparently many are still able to indulge in elevated consumption. The personal consumption expenditure index is the main gauge used by the Fed to determine how individuals are spending on a personal level. The 6.2% metric is more than double where the Fed likes to see it, which is typically around 2%.
What’s To Be Expected?
In his address, chairman Powell also alluded to the possibility that rate increases could taper as soon as the December FOMC meeting. On the heels of the same sentence chairman Powell also mentioned that it is the job of the federal reserve to control the inflation rate, which the committee still deems far from complete. The Fed chief made it clear that rates could just as easily be increased by the same measure again next month if the board finds it necessary to do so. The chairman warned that people should heed that sentiment and prepare for more measures to be taken until the committee believes the inflation rate and spending is in fact back under control, and close to the desired 2% level.
Still, with the possibility of future rate hikes to come, and also uncertainty in the job market since the effect of higher interest rates are not typically experienced for at least a few months after they’re implemented, the market has responded so far with uptrends that sent BTC, ETH, ADA, XRP and other cryptocurrencies pumping through Friday.
As the US Dollar Index (DXY) lost some ground against other currencies, and Europe reported greater levels of inflation to justify historic rate hikes, traders and investors showed preference to swap greenbacks for digital assets, stocks, and other non-fiat instruments. As December approaches, many can be expected to watch for the most up-to-date financial and crypto related news to navigate the uncertain market sentiment with some degree of confidence.