Low inflation or bust: Analysts say the Fed has no choice but to continue raising rates

Financial experts around the world are placing increasing blame on the United States Federal Reserve for the worsening economic conditions. The central bank failed to react quickly to the rise in inflation and has been slow to correct it.

The financial markets are experiencing the worst losses in their history and there’s no relief. The tech-heavy Nasdaq fell another 2% on May 24, while Snap, a popular social networking company, lost 43.1% in trading on May 23,

This past couple of months have been absolutely brutal for the markets… 8 consecutive weeks of red candles in the #SPX, #NASDAQ and #BTC… no significant bounces pic.twitter.com/hgU2VwIoxh
— Crypto Phoenix (@CryptoPheonix1) May 24, 20,22

The Fed is responsible for much of the turmoil in recent times. They have taken on the mission to raise interest rates to control inflation. Financial markets are not to be blamed.

Here are the views of several analysts on how this could unfold and what that means for Bitcoin’s price (BTC) going forward.

Is the Fed going to tighten the screws until the markets collapse?

Investors looking for immediate relief from the Fed’s tightening will be disappointed to hear that Alex Kruger, an economist, believes that the Fed will continue tightening until markets collapse (far from it) or inflation falls significantly and for many months.

The Fed’s inability to define what inflation looks like to allow them to stop the rate-hike pedal is one of the major issues that affect traders’ psyches. It simply reiterates its goal to “see clear and convincing evidence that inflation is falling” towards its 2% target.

Kruger stated that the Fed “will need to see Y/Y [year over year] inflation fall 0.25%-0.33% average every month up to September” in order to achieve its goal of bringing inflation down to 4.3%-3.7% by the end.

Kruger warned that if the Fed fails to meet its September PCE inflation target, Kruger could warn about the possibility of the Fed initiating “more hikes than what’s priced into” and may also explore the sale of mortgage-backed security as part of a quantitative tightening campaign.

Kruger said:

“Then the markets would shift to a new equilibrium, and then dump hard.”
For sustained inflation of double the rate, prepare

Bill Ackman, a billionaire investor and manager of hedge funds, also discussed the Fed’s responsibility in current market conditions. He suggested that aggressive monetary tightening was the only way to end today’s raging inflation.

According to Ackman, the Fed’s slow response in inflation has severely damaged its reputation. However, its current policy and guidance “are setting up for double-digit sustained inflation which can only be prevented by a market crash or a huge increase in rates.”

These factors have resulted in a decreased demand for stocks in 2022, as evidenced by recent stock price declines, particularly in the tech sector. The tech-heavy Nasdaq Index is down 26% over the past year.

It’s no surprise that the cryptocurrency market has been affected by low tech sentiments. This could continue until high inflation is addressed.

Related: Bitcoin price drops to $29K per week as Nasdaq takes over new US stocks

What is the future of Bitcoin?

Kruger says that the “base case scenario” for the upcoming price trajectory includes a range of summer prices, which starts with a rally and ends with a fall back to the bottoms.

BTC/USDT 1-day chart. Source: Twitter

Kruger said:

“For $BTC that rally would be priced at the Luna dump (34k-35.5k).

Rekt Capital, a crypto trader and pseudonymous Twitter account user, posted the following chart that shows Bitcoin relative to its 200 day moving average.

BTC/USD 1-week chart. Source: Rekt Capital

Rekt Capital said:

“Historically, #BTC has topped at or below the 200 MA (orange). Investors in $BTC have a greater chance of obtaining a high ROI at the 200-MA (orange). […] If BTC does indeed reach the 200 MA support… It would be prudent to pay attention.

The total cryptocurrency market capitalization is now at $1.258 trillion. Bitcoin’s dominance rate of 44.5%.

com. You should do your research before making any investment or trading decision.

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Eileen Wilson

Eileen Wilson –Technology and Energy My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of topmagazinewire.com with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.

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