Federal Reserve Could Taper ‘Soon’ and Officials See Interest Rate Hike Next Year Officials still characterized inflation as “transitory,” and bitcoin’s price rose.The Federal Reserve said it would keep interest rates near 0% and keep purchasing bonds at the same $120 billion-a-month pace, but the market now has a clarity on what a tapering might look like.The Federal Open Market Committee (FOMC), the U.S.central bank’s monetary policy committee said Wednesday in a statement that tapering the bank’s bond purchases “could be warranted soon” because the economy has made progress towards its goal of maximum employment.The panel said it would keep the target rate for federal funds in a range of 0% to 0.25%, according to the statement.
Fed Chair Jerome Powell said in a press conference that the tapering process could end by the “middle of next year” if the economy continues to make progress towards maximum employment.
“Vaccinations and unprecedented fiscal policy actions are also providing strong support to the recovery indicators of economic activity,” Powell said.“We are seeing upward pressure on prices,” Powell said, citing the impact of “supply bottlenecks” The decision is being closely watched by bitcoin traders, many of whom say that the largest cryptocurrency can serve as a hedge against currency debasement in the face of ultra-loose monetary policy.Bitcoin price rose 1.9% after the decision, pushing the gain over the past 24 hours to 3.9%, possibly a signal that traders remain unconvinced the Fed will turn hawkish anytime soon.Many cryptocurrency investors speculate that QE could weaken the dollar, pushing up the value of bitcoin, which has a capped supply.
Bitcoin is also still seen on Wall Street as a speculative asset, and the bet is that more investors will be forced to seek such investments as so-called quantitative easing or “QE” – the practice of printing money to stimulate markets – suppresses returns in traditional bond markets.Fed officials also raised their inflation expectations and moved the year for interest rates to rise from 2023 to 2022, based on the “Summary of Economic Projections” (SEP) also released Wednesday.In the case that bitcoin is treated as a hedge against inflation because of its capped supply, this could be a positive note for crypto investors.According to the summary of economic projections: – Federal officials’ median expectation for growth this year in gross domestic product dropped to 5.9% from the 7% expected in June, when they last disclosed projections.- The unemployment rate is seen at 4.8% this year, the higher than what was projected in June.- Prices for personal consumption expenditures, the Fed’s preferred inflation measure, could rise 4.2% this year, compared with a June projection of 3.4%.
– The median projection is now for two interest rate increases by the end of 2022 and three officials now see two rate hikes next year.At the June meeting, only seven Fed officials were expecting a liftoff that soon.
(Not all Fed officials who plot dots are FOMC voting members, which means that the dots are a projection, not a forecast.) DISCLOSURE The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a [strict set of editorial policies](/ethics/) .CoinDesk is an independent operating subsidiary of Digital Currency Group , which invests in cryptocurrencies and blockchain startups ..
