Low Inflation Forces FED to Increase Fund Rates

  • June 6, 2022
  • Admin_Blockchain
Low Inflation Forces FED to Increase Fund Rates

The steady hike in the interest rate of the Federal Reserve has put crypto and stock in bear territory. However, the main concern that analysts raise is the target range. Since the economic conditions are continuing to decline, financial experts around the world are blaming the United States Federal Reserve, pointing out flaws in its policies that led to an early rise in inflation. 

The stretch of loss has been significant in the recent financial markets. Moreover, there is no economic relief in sight. In May 2022, NASDAQ fell by 2%. The popular social media company, Snap made a loss of 43.1% of market capital in trading. To get inflation under control, the Federal Reserve has decided to raise interest rates. Thus, the recent turmoil returns to Fed, surprising the financial market.

Here we will discuss the present situation of FED and increasing fund rates and its impact on the future of Bitcoin.  

Also Read: South Korea Imposes New Legislation on Cryptocurrency

Can FED Pull Back Until the Markets Break?

Investors often look for a short-term investment. Alex Kruger, a well-known US economist,  suggests that the FED will not lower rates until the market breaks or the inflation gets under control in a long term. Another major issue that the traders are facing is that FED has not yet set a mark as to when the inflation will get down and they would reduce their funding rates. FED suggests that the funding rates will go down as soon as the inflation falls to 2%. 

As per Alex Kruger, FED might want to look at the year-over-year inflation drop from 0.25%-0.33% on average for every month till September to achieve its goal of lowering the inflation rate between 4.3%-3.2% every year. If the PCE does not get under control by the end of September, the Federal Reserve may continue its high funding rates and may start campaigning for selling mortgage-backed securities, to conduct a tightening campaign. The financial market may start shifting towards a new symmetry making it hard for investors to survive. 

Also Read: Setting up Your Own Crypto Exchange, the Smart Way

A Double-Digit Assisted Setup for Inflation

The responsibility of the Federal Reserve with the current market condition has reached a high level, according to billionaire investors. The only way to stop the raging inflation is aggressive monetary tightening. 

According to Bill Ackman, the slow response of the FED to inflation has damaged its reputation. However, the current situation may double up and could only pause after a market collapse. 

In Conclusion

These economic factors have muted the stock exposure in 2022 which has led to the recent decline in stock prices and the tech sector. NASDAQ is a tech-heavy index that is down by 26% this year. Since the cryptocurrency market entirely depends on the tech world, the tech industry’s weakness and downfall have impacted the crypto market, and the trend could only end with a market collapse.

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