• The Federal Reserve (FED) may be losing control of the markets, which could lead to even more hawkish measures impacting both traditional and cryptocurrency markets.
• According to Michael J. Kramer, founder of Mott Capital, the FED needs to “push back against the market before it’s too late.”
• The FED has two options: raise rates by 50 basis points (bps), or signal that financial conditions have eased too much, which could prolong the rate tightening cycle.
The Fed’s Loss of Control
The crypto industry may be facing a major setback as the Federal Reserve (FED) appears to be losing control of the markets. This new status quo could lead to even more hawkish measures impacting the traditional and cryptocurrency markets.
Impact on Markets
Since the December Federal Open Market Committee (FOMC) meeting, financial conditions have eased dramatically leading to a rise in commodity prices, a drop in mortgage rates, a weakening dollar, and a rally in stocks and significant crypto assets including Bitcoin, Ethereum, and others.
February Meeting Crucial
A report released on January 29 by Michael J. Kramer – founder of Mott Capital suggests that February Federal Open Market Committee (FOMC) meeting will be crucial because the FED will need to roll back the current easing of financial conditions. In addition, this market condition is at same level as when FED began raising interest rates push back at this point maybe even more complex than when Fed Chair Jerome Powell gave Jackson Hole speech.
Objective: Restore Price Stability
The financial institution has been challenging with restoring price stability by “softening” labor conditions leading them to use “forceful tools to bring supply and demand into a better balance.” As such they have been hiking interest rates with an objective of bringing down inflation rate
Options For The Fed
Accordingly investors know that FED is closer to end its hiking cycle than beginning ,the market also expects inflation continue its downward trend .Thus any aggressive measure by financial institution could surprise legacy and crypto market causing more significant losses than expected .In his analysis Michael J Kramer says Fed has two options :raise rates by 50 basis points(bps )which could be big surprise for markets or signal that financial conditions have eased too much which could prolong rate tightening cycle