Bitcoin prices rose in the results of the Federal Open Markets Commission (FOMC).
The U.S. Federal Reserve (Fed) raised its outlook on the U.S. economic situation, including economic growth and unemployment, and expressed negative stance on the possibility of a rapid rate hike and the introduction of tapering. As concerns about a rate hike caused by the recent surge in U.S. Treasury bond rates disappeared, bitcoin prices have also risen sharply.
The Fed projected an economic growth rate of 6.5% this year at the Federal Open Market Committee (FOMC) in March held at 3 am on the 18th. This is a significant improvement from the 4.2% estimate in December last year. The forecast for the unemployment rate has declined from 5.0% to 4.5%. In particular, it is predicted that the unemployment rate will be 3.5%, the level before the coronavirus in 2023. This means that the US economy is recovering rapidly.
In general, this improvement in economic indicators raises concerns about inflation, and the Fed responds with an interest rate hike. This is why the interest rate of U.S. Treasury bonds maturing in the past 10 years has soared beyond 1.6%. However, Fed Chairman Jerome Powell stressed that “we must confirm that actual indicators are progressing, not improvement prospects,” and emphasized that the current rate will continue to be relaxed.
In particular, this year’s consumer inflation rate is expected to increase by 2.4% and the core inflation rate to increase by 2.2%. The core inflation rate is a major factor in determining the Fed’s base rate, and the goal is to maintain 2.0%. Even if the inflation rate exceeds this, it will stick with the current monetary policy direction for the time being. Regarding the’tapering’ measure of the Fed’s direct purchase of assets such as government bonds, Chairman Powell drew a line saying, “This is not the time to do so.”
As concerns about an interest rate hike were lifted, the bitcoin price, which had hit $55,500 (based on Binance) just before FOMC, has recovered rapidly to the 58,000 mark. At 9 a.m., it also hit $59,500. That’s a 7.2% increase in 6 hours. Stock markets such as Dow Jones and Nasdaq also ended slightly higher.
Concerns over interest rate instability, which have made the market unstable since February, have not been completely resolved. On this day, the Fed avoided an immediate answer to the deregulation of the’Complementary Leverage Ratio’ (SLR), which is one of the main issues.
Originally, commercial banks in the U.S. had to hold a certain level of equity capital when purchasing various assets including U.S. government bonds, which is called a complementary leverage ratio. The Fed has temporarily eased this rate regulation for one year in response to the need to revitalize investment in the corona 19 phase last year.
By the end of March, this deregulation deadline will end. If the Fed does not extend deregulation, banks’ treasury bonds on the market could surge, triggering an unstable interest rate again. Chairman Powell replied at a press conference, “The Fed will make a presentation on the SLR within a few days.”
The 10-year Treasury bond rate, which once rose to 1.687% just before the FOMC, fell to 1.620% during Powell’s interview and has risen to 1.660% as of 11 am.
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