Bitcoin and Crypto Market Edge Up 4% Following Fed's 0.25% Interest Rate Hike

The Federal Reserve's announcement seemed to spur the crypto markets higher even though almost everyone expected the Fed hike would happen.

Bitcoin and the cryptocurrency market in general climbed about 4% following Wednesday's announcement from the U.S. Federal Reserve that it would increase interest rates by 0.25% -- marking the central bank's first such rate adjustment since 2018.

Following the announcement, the overall crypto market and Bitcoin went surprisingly higher to $1.83 trillion and $41,204, respectively, according to CoinMarketCap at press time.

The Fed further indicated that it plans to raise rates "several times" in 2022, representing a stark reversal to its loose lending and overgenerous efforts to print and pump U.S. dollars into the economy since the COVID-19 pandemic began two years ago. "We need to move away from very low interest rates. They're not appropriate for the current situation in the economy," Chair Powell testified before the House Financial Services Committee in early March.

Fed hopes rate hikes will slow record-high inflation

Last week, the U.S. Bureau of Labor Statistics released data that showed the primary inflation gauge -- the consumer price index -- was up 7.9% for February, marking the highest level in 40 years and the 10th straight month it was higher than 5%.

In its official statement also issued Wednesday, the Federal Open Market Committee (FOMC) -- which is the actual subcommittee of the Fed that sets monetary policy -- said Russia's invasion of Ukraine and that ongoing war could drive inflation higher in the short term.

"The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain, but in the near term, the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity," the FOMC announcement read.

The FOMC went on to state that its goal of "maximum employment and inflation at the rate of 2 percent over the longer run" could be achieved with its renewed efforts to tighten monetary policy. However, it also stated that it would not operate in a vacuum and could recalibrate based on a range of information and data that it would take into consideration, including public health concerns, inflationary pressures, international developments, and labor market factors.