Market volatility spikes after Powell hints Fed could slow rate hikes amid banking stress

Federal Reserve Chairman Jerome Powell said on May 19 that interest rates may not need to be as high as previously estimated to slow the economy.

Powell said the “development” in the banking sector was tightening credit conditions and was likely to affect economic growth and inflation. However, it is unclear to what extent the tightening of credit has affected inflation, he added.

Mr. Powell commented during his speech Story At the Thomas Laubach Research Conference.

Inflation ‘takes time’

On guidance, Powell said the Fed was changing its stance on tightening policy, saying that while inflation “will take some time” to come down, “the risks of going too far and too little are becoming more balanced.” .

He added that the Fed has yet to decide whether further tightening is necessary, but that it now has “room to look at the data and the outlook for developments” to make a “prudent assessment.”

Mr Powell said:

“We have come a long way in tightening policy, but the stance of policy is limited. ing.”

Powell said stress on the banking system would be a key factor influencing the central bank’s rate hike decisions in the coming months.

Ultimately, however, the Fed’s decision will depend on economic conditions, and new shocks such as the Russo-Ukrainian war or the COVID-19 pandemic could change current guidance. stated that it is possible.

The cryptocurrency market eagerly awaited comments and price action points for the industry to react positively to this news.

Cryptocurrency reaction

Bitcoin experienced a spike in volatility after Chairman Powell’s comments about raising interest rates, briefly surpassing $27,000 before falling to a 24-hour low of about $26,718.

However, the market seems optimistic about the Fed’s future actions as the flagship cryptocurrency is trending higher despite minor fluctuations in the hours following the livestream.

Bitcoin was trading at $26,927 at the time of writing.

Ethereum saw similar volatility in trading, but at a much narrower price range. The second-largest cryptocurrency surged to $1,823 after Powell’s speech, then plummeted to $1,803 before trending upwards again.

At the time of writing, Ethereum was trading at $1,818, just a few dollars short of its 24-hour high.

Most of the top 100 cryptocurrencies and all of the top 10 cryptocurrencies traded profitably on a 24-hour basis.

After Powell’s speech, most of the major cryptocurrencies recorded a rally, showing optimism for the cryptocurrency market.