Bitcoin, the largest cryptocurrency by market capitalization, rose more than 3% on Thursday to recover from a sharp drop to under US$19,000 after the Federal Open Market Committee said it would raise interest rates by 75 basis points, or in line with market expectations, to rein in inflation.
- Bitcoin traded at US$19,634 as of 3 am Hong Kong time, while most of the other top 10 cryptocurrencies by market capitalization rose, according to data by Coinmarketcap.com.
- The S&P 500 (SPX) rose 0.78% while the tech-heavy Nasdaq Composite gained 1.06% after the announcement on Wednesday U.S. time.
- Bitcoin and other cryptocurrency prices have tended to move more in correlation with equities this year.
- Fed Chairman Jerome Powell said he is committed to bringing inflation back down to around 2%, from the current rate in excess of 8%, though his challenge is to achieve that without causing a spike in unemployment rate and tipping the economy into a deepening recession.
- Raising the cost of borrowing is expected to discourage consumers from taking out loans to buy goods like cars or a new home.
- Earlier this month, the U.S. Bureau of Labor Statistics reported that the Consumer Price Index rose 0.1% in August over July, compared to market expectations for a 0.1% decline. August inflation was up 8.3% on year.
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