75 basis points "arrived as expected" Powell hinted at slowing down the pace of rate hikes as early as December

On the afternoon of November 2, New York time, the Federal Reserve once again raised interest rates by 75 basis points (bps) to the Federal Funds Rate (FFR). Even before the Federal Open Market Committee (FOMC) meeting, the market had already digested and predicted the 75 basis point increase, but there were different opinions on the future policy shift.

Federal Reserve Chairman Powell made it clear at a press conference that it is too early to consider suspending interest rate hikes, and the issue of reducing the pace of interest rate hikes may be discussed as early as December.

Tighter monetary policy typically reduces the appeal of risky assets, so crypto traders closely watch Fed policy.

Data from the Bitpush terminal showed that Bitcoin rose 1.3% after the FOMC interest rate decision was announced, but after Powell said that a pause in interest rate hikes was not possible for the time being, Bitcoin and Ethereum fell slightly along with U.S. stocks, with the S&P 500 falling 2% and the Dow Jones Industrial Average falling 416 points, or 1.3%; the Nasdaq Composite also fell 2.8%.

At the time of writing, Bitcoin is trading at $20,237, down 1% over the 24-hour period. It reached a range high of $20,705 earlier on Wednesday, while Ethereum surged from $1,561 to $1,612 before falling to $1,540.

Slow down, not pause

Prior to this round of rate hikes, the White House reported that the Biden administration plans to allocate $13.5 billion to help low-income American families pay for heating this winter. This is because continued high inflation has caused American consumers to pay 28% more for residential heating than in the winter of 2021.

In its announcement on Wednesday, the FOMC noted: "Recent indicators point to modest growth in spending and production, job gains have been strong in recent months, and the unemployment rate has remained low. Inflation has remained elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures... Russia's war on Ukraine is causing substantial human and economic hardship. The war and related events are exerting additional upward pressure on inflation and weighing on global economic activity, and the Committee is highly concerned about inflation risks".

The Fed's rate hike followed a report from the US central bank's main inflation indicator, the Personal Consumption Expenditures (PCE) price index, which showed a 0.5% increase in September. In addition, the latest Consumer Price Index (CPI) report noted that US consumer prices rose 8.2% in September.

Powell stressed at the press conference that he believed the Fed had not over-tightened and that it was "too early" to discuss a pause.

But he also hinted that the Fed was considering slowing the pace of rate hikes in the near future, saying: "It would be appropriate to slow down at some point ... It could be at the next [December] meeting or the meeting after that, and we'll probably discuss it at the next meeting."

How it affects the crypto market

Continued rate hikes are bad for cryptocurrency prices, and risk assets such as stocks and cryptocurrencies have been highly correlated since the beginning of 2022. The crypto market is already in "winter" mode, with token prices falling sharply across the board as investors retreat due to rising interest rates, surging inflation, and a potential recession.

“Most cryptocurrency watchers are still waiting for further weakness, and as calls for a global recession grow louder, the focus will turn to how soon the Fed will cut interest rates,” said Edward Moya, senior market analyst at Oanda.

Nick Hotz, vice president of research at Arca, commented: “Inflation remains high, so rate hikes will continue, but the pace of hikes will slow. But any signs of easing by the Fed will be seen as a short-term positive for digital assets.”

Crucially, the Fed said it would consider a variety of factors related to future rate hikes, including "the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments." Therefore, inflation and labor market data in the coming months and quarters will be critical, and if the 2% target is not achieved, the cloud of rate hikes will continue to hang over the market.