As the Fed and many central banks around the world prepare to slow down monetary easing, global markets ignore forecasts. On Wednesday, the Federal Open Market Committee (FOMC) of the U.S. central bank stated that it plans to gradually reduce quantitative easing (mass purchases of assets each month) and end the program by March 2022. In addition, FOMC members decided to keep interest rates at zero, but they are expected to raise interest rates at least three times next year.

The Fed outlines its asset purchase reduction plan and interest rate hikes in 2022

Since the outbreak of Covid-19 in the United States, the Federal Reserve has initiated an unprecedented monetary easing policy in history.This move resulted in Soaring inflation Analysts and economists around the world Criticize the Fed’s decision recently.The Federal Open Market Committee concluded its two-day meeting on Wednesday, and the central bank explain It plans to reduce its bond purchase program to $30 billion per month by January. The Fed will use $90 billion in quantitative easing (QE) purchases this month, compared with $120 billion last month.

In addition to reducing QE, FOMC members also detailed The central bank plans to raise interest rates three times next year. It is estimated that there will be three interest rate hikes in 2022, two interest rate hikes in 2023, and two more interest rate hikes in 2024. However, the Fed did not blame quantitative easing for rising inflation in the United States, but pointed out that inflation is driven by supply and demand.

The Federal Open Market Committee said on Wednesday: “The imbalance between supply and demand related to the pandemic and economic reopening continues to cause inflation to rise.” In addition, the Federal Open Market Committee’s statement stated that Covid-19 and the new variant of the coronavirus have had an impact on the U.S. economy. Great influence.

“Buy rumors, sell facts”: Global markets and Bitcoin rise after the FOMC meeting

Despite the announcement of the interest rate cut and disclosure that it may raise interest rates three times next year, the Fed’s remarks are contrary to the market reaction predicted before the announcement of the interest rate cut. After the meeting of the Federal Open Market Committee, the Nasdaq, the New York Stock Exchange and the Dow Jones index all rose. In an interview with Bitcoin.com News, Alex Kuptsikevich, a senior market analyst at Fxpro, stated that the Fed “maintained the most hawkish side of market expectations” on Wednesday.

Kuptsikevich said: “The FOMC announced that it will double the pace of reduction.” “The committee’s latest forecast indicates that there will be three key interest rate hikes in 2022, although only six months ago, it is not expected to raise interest rates. We also heard that , Due to rising inflation, the balance of the Fed’s goal allows interest rate hikes to begin before full employment is achieved.”

“The Chairman of the Federal Reserve also called the valuation of financial assets’increased’,” the market analyst continued. “This is a clear signal of willingness to hurt the market, as he did in 2018. At the press conference, Powell pointed out that the Federal Open Market Committee has not yet reached a consensus on when the Fed will cut its balance sheet. In the end of the stimulus cycle, this is not a real problem long after the start of the interest rate hike-the US dollar index rose within the first minute after the FOMC meeting, hitting its high since July 2020, but then fell again, since the time of writing The peak of the decline was 0.8%.”

Kupczkiewicz added:

It feels that the market is ready for the risk, looking forward to the Fed’s weakness, even though the Fed’s remarks did not give in. Some commentators believe that we have seen the classic “buy rumors, sell the facts” reaction. However, the rise in “growth” stocks is more of a sign that market sentiment ended a strong year in a happy way. At the same time, in the US dollar, a wave of profit-taking growth over the past six months seems to have begun, although the Fed’s stance is much tougher compared to other central banks in the DXY basket.

even Bitcoin (BTC) As the price rose by a notch after the announcement of the FOMC’s tough plan, the price on Wednesday exceeded expectations. Just before the end of the meeting, Bitcoin Changed hands at a price of US$46,590 per unit. After the FOMC meeting, Bitcoin The price soared to a high of $49,420 on Wednesday afternoon (Eastern Time).

The Bank of England raised its benchmark interest rate, the European Central Bank kept interest rates unchanged, and the number of initial jobless claims in the United States is still higher than before the epidemic

In addition to the FOMC meeting, the Bank of England (BoE) raised its benchmark interest rate from 0.1% to 0.25%. No other central bank has done this yet. The European Central Bank, like the Federal Reserve, has temporarily kept its benchmark interest rate unchanged.

The European Central Bank explained that it will not raise lending rates until inflation stabilizes.In addition, the number of initial jobless claims each week in the United States Publish The Labor Department said there was an increase last week. According to a report from the Department of Labor, the number of initial jobless claims is still much higher than the pre-pandemic level.

What do you think of the Fed’s reduction process and the discussion about raising the benchmark interest rate three times in 2022? What do you think of the Bank of England raising its benchmark interest rate for the first time since the Covid-19 pandemic? Please tell us your thoughts on this topic in the comments section below.

Jamie Redman

Jamie Redman is the head of news at Bitcoin.com News and a fintech reporter living in Florida. Since 2011, Redman has been an active member of the cryptocurrency community. He is passionate about Bitcoin, open source code and decentralized applications. Since September 2015, Redman has written more than 4,900 articles about destructive protocols emerging today for Bitcoin.com News.