Fed Announces a 0.75% Hike in Interest Rates, Crypto Markets Are Muted

The Fed is hoping a more aggressive approach to bring up interest rates may draw down pricing pressures.

This afternoon, the U.S. Federal Reserve announced its plan to boost interest rates by 0.75% in an effort to cool down the rising, red-hot inflation rate, which hit a 40-year high of 8.6% compared to the same period last year. The Fed's action today marks the highest single-day interest rate hike since 1994.

Here's what the Fed announced

The Fed issued its latest Federal Open Market Committee (FOMC) statement, which did not contain any real surprises as the three-quarter percent rate hike was rumored and baked into the bond, equities, and crypto markets for the past week.

"Overall economic activity appears to have picked up after edging down in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures," the FOMC statement reads.

The Fed's decision pushes the costs of short-term borrowing higher to try and hobble inflation back to about 2% from the non-transitory surge in consumer prices that has occurred during the past 12 months.

"In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1.50 percent to 1.75 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that were issued in May," the statement reads.

Crypto markets reaction is neutral for now

At time of writing, the largest crypto by market cap -- Bitcoin -- was range-bound between $20,000 and $21,000 per coin, according to CoinMarketCap. Bitcoin was well within the intraday trading range prior to the Fed's announcement. That seems to be the case across the cryptocurrency exchanges and broader crypto market overall, which was down more than 3% on the day before the FOMC decision and was largely unchanged following the news. Over in the equities market, Coinbase was up 3% to more than $53 per share, according to Yahoo! Finance.

During his televised comments following the issuance of the FOMC statement, Chair Powell reiterated empathy for the U.S. consumers facing high inflation rates and restated the Fed's commitment to ensure maximum employment and consumer price stability. He also said the Fed is open to another 0.50% or 0.75% rate hike during its next FOMC meeting scheduled for the end of July 2022.