Gold And Bitcoin Prices Have Risen As Fed Chairman Powell Said A 75 Basis Point Rate Hike In June Is No Longer On The Table

2022-05-05 | Selina Mathew

Gold And Bitcoin Prices Have Risen As Fed Chairman Powell Said A 75 Basis Point Rate Hike In June Is No Longer On The Table

Gold, bitcoin, and the US stock market all rallied sharply after Federal Reserve Chair Jerome Powell ruled out a 75-basis-point rate rise at subsequent meetings, defying market expectations for June.

Powell made his remarks during a press conference following the Federal Reserve's decision to raise interest rates by 50 basis points, the largest increase since 2000.

"The committee is not actively discussing a 75-basis-point rise," Powell told reporters on Wednesday. "[We're] bringing the policy rate down to more normal levels as quickly as possible." Additional 50bps hikes should be discussed in the next sessions. We'll make choices on a meeting-by-meeting basis as we gather information. The ultimate objective is to "reduce inflation down to our target of 2%."

Despite the fact that the US economy shrank by 1.4 percent in the first quarter, Powell said the Fed had a "good probability" of achieving a "softish landing" this year as it rapidly tightens monetary policy.

"Households and companies are in good financial health, the job market is strong, and the economy is well-positioned to manage tighter monetary policy." However, it will be difficult and time-consuming. "It will be determined by factors beyond our control," he stated. "We hiked by 50 basis points today, and the committee agrees that another 50 basis points should be on the table for the next couple of sessions."

Powell would prefer to see significant progress on the inflation front before reducing rate rises to just 25 basis points.

Some factors, such as the upward pressure on inflation caused by Russia's invasion of Ukraine and China's COVID lockdowns, will remain beyond the Fed's control.

However, Powell noted that there are no signs that the US economy is "susceptible to a recession" or that it can't sustain higher rates. However, he acknowledged that, given global events and tighter monetary policy, the US economy may see weaker growth.

Powell stated that he does not believe there is a conflict between the two aspects of the Fed's mandate — maximum employment and price stability — at this time. "I don't," he continued, "because you can see that the labour market is out of balance."

According to the CME FedWatch Tool, market participants expected a nearly 100 percent possibility of a 75-basis-point rate rise at the June meeting before the meeting. Following the news, the percentage of those who had high hopes dropped to 75%.

Gold, bitcoin, and the US stock market all rose in response to Powell's more lenient remarks, as markets re-priced future rate rise expectations.


Leave a comment

Your email address will not be published. Required fields are marked *

Top 7 cryptocurrency overview

Best trading tool for cryptocurrency

2022 Top cryptocurrency Price Prediction List