The Federal Reserve is very close to achieving what it set out to do. According to the World Bank, the global economy will face a recession due to the global aggressive monetary policy by various nations. The US Federal Reserve has led the charge in increasing interest rates to curb inflation. The ECB and other central banks have followed suit. As a result, the crypto market now faces the risk of a recession.
Meanwhile, transportation and shipping company, FedEx, highlights that the demand slowdown has accelerated. It reveals that the US economy faces a recession. As a result, the company’s share has fallen by 16%.
How Likely Is A Recession
The Federal Reserve is responsible to combat extraordinary economic conditions through monetary policies. In response to the soaring inflation, the Fed engaged in aggressive quantitative tightening. It raised interest rates through three successive jumbo hikes of 75 bps. Despite slight cooling in inflation levels, the Fed has struggled to curb soaring prices.
The CPI for August highlights a worse-than-expected 8.3% YoY inflation. It bolstered the Fed’s hawkish stance as the market now prices in a 100 bps hike. A Bloomberg survey of economists reveals that the Fed is targeting 4% interest rates till 2023.
Massachusetts Senator Elizabeth Warren questioned Powell’s aggressive stance and highlights that it can lead to recession without removing the root cause of inflation.
Impact Of Recession On Crypto
Bitcoin, the largest cryptocurrency, was invented in 2009 after the last major recession of 2008. Therefore, the impact of the recession on crypto is debatable. According to some experts, as companies struggle to profit during a recession, the stock market crashes. As a result, crypto, which is strongly correlated to the general market, will struggle as well.
However, others highlight that as the dollar weakens during a recession, people will look elsewhere to invest. As a result, the crypto market will bloom during inflation.