Bitcoin and broader crypto market are up ahead of Fed interest rate news

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It is all but certain that the Federal Reserve will announce another 0.75% increase to its target rate today – but could it announce a full 1.00% increase?

Important points

• The Fed’s monthly meeting ends today, and it is believed that the central bank will announce an increase in short-term interest rates of at least three-quarters of a percentage point.
• It is possible that the Fed could surprise the markets with a 1.00% rate hike as the Atlanta Fed President has recently stated that everything was “in play”. Earlier this month, the Bank of Canada raised its own national funds rate by a full percentage point.
• Crypto markets are surprisingly higher this morning as the entire cryptocurrency sector is up 3.5% as well as the vast majority of digital assets over the past 24-hour stretch according to CoinMarketCap.

The Federal Reserve’s July Federal Open Market Committee (FOMC) meeting concludes today. Both the financial and cryptocurrency markets are trending higher with the expected news that the FOMC plans to raise short-term interest rates by 0.75% to try to curb inflation. At the time of writing, the crypto sector is up more than 3.5%, while every top-100 crypto is also trading higher in the past 24 hours across cryptocurrency exchanges, according to CoinMarketCap. Top crypto asset Bitcoin keeps pace as price is up 2.5% on intraday trade as well.

Could the Fed raise short-term interest rates by as much as 1%?

In June, the year-on-year inflation rate hit another 40-year high – marking 13 consecutive months of inflation above 5%. As a result, the Fed announced its plans last month to raise the target federal funds rate by 0.75% to try to cool red-hot inflation. At the same meeting in June, Fed Chair Jerome Powell openly stated that another 0.75% increase was likely when the central bank’s July meeting ends today.

However, two weeks ago, Atlanta Fed President Raphael Bostic was quoted in media reports as saying that the Fed could surprise markets with a higher increase in short-term interest rates as high as 1.00%. Bostic noted that the stunning 9.1% increase in the inflation rate last month was a concern and everything was “in play.” Earlier this month, the Bank of Canada raised its short-term lending rate by a full percentage point after months of steady half-point increases. Despite these assessments, many financial analysts and crypto watchers say Powell will most likely aim lower.

“Seventy-five points [0.75%] is more likely than 100 bps [1.00%] but we do not expect any significant decrease in volatility anyway. Last week [crypto] bounce while showing some good signals was not nearly enough for Bitcoin. What worries us more at this point than the Fed move are the downward revisions to earnings to be reported this week from some giant companies. However, Bitcoin’s 30-day correlation with the S&P fell to 0.76, which is a sign that makes us optimistic,” said Dr. Martin Hiesboeck, head of blockchain and crypto research at digital trading platform Uphold in emailed remarks to Motley Fool Ascent .

If the Federal Reserve raises interest rates another 0.75%, the cost of borrowing money will rise to the 2.25%-2.50% range. While it will take some time for average consumers to see higher rates for adjustable rate mortgages, home equity loans, car payments and credit cards, we all experience the price pressures of inflation in real time. We will have to wait and see if the Fed’s actions have actually slowed inflation when consumer price data for July is released on August 10.