Federal Reserve Chair Jerome H. Powell’s hawkish remarks during a hearing on the “Monetary Policy Report” caused Bitcoin to dip by $22,000 on Tuesday. Powell warned that interest rates may end up higher than expected to address high inflation, which remains well above the Federal Open Market Committee’s target of 2%. Investors and lawmakers are closely watching for clues about the Fed’s next policy moves, which could include another 25 basis point rate increase or a more significant 50 basis point hike in March. Powell is also expected to face questions about banking regulation, with Democrats pushing for tighter capital standards and Republicans favoring looser treatment.
Bitcoin was already trading flat due to concerns about regulatory pressure and inflation before Powell’s appearance, but his comments pushed the cryptocurrency to an intraday low of $22,085 on the Bitstamp exchange. Despite its recent underwhelming performance, Bitcoin has outperformed major stock indices and gold this year, with a year-to-date return of around 32%. However, its growth has been hampered by various factors, including regulatory uncertainty, the collapse of crypto-friendly bank Silvergate Capital, and rising investor worries about inflation and interest rates.
The Committee on Banking, Housing, and Urban Affairs will hold the hearing in an open session with a hybrid format, webcast live for viewers. Powell’s remarks reviewed the current economic situation and outlook, acknowledging the significant hardship caused by high inflation, which the Federal Reserve aims to bring down to its 2% target. He also discussed monetary policy and the tight labor market, which have led the FOMC to tighten the stance of monetary policy. Investors are looking to Powell’s testimony to determine the market’s direction near-term, but the Fed chair may withhold judgment until upcoming jobs and inflation data become available.
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