The Federal Reserve says higher interest rates could tighten the stress for banks, but what about Bitcoin?

The Federal Reserve says higher interest rates could tighten the stress for banks, but what about Bitcoin?

Historically high interest rates in the United States could "tighten" the stress in an already unstable banking system, said a member of the Governor Council of the Federal Reserve on Wednesday.

The governor also indicated that the central bank may decide to not raise its key interest rate at the next meeting of the Federal Open Market Committee (FOMC) what could affect the Bitcoin price.

rising interest rates and increasing debts

Fed governor Philip N. Jefferson noticed on the economic view of the US financial system during a speech at the 22nd international challenge for political challenges for Financial sector in Washington DC

The governor claimed that the banking system "stabilized" according to several banking storms and enforcements in March, but recognized the risks associated with increased short-term interest rates that are "five percentage points higher than a little more than one year". ”

As Jefferson explained, the effects of monetary policy with "long and variable delays", which are not completely taken into account in one year alone. For the rest of the year, he predicts slow growth in the face of "increased uncertainty" and a decline in the savings of private households and tense financial conditions.

Although the governor does not predict a recession, he claimed that the combination of low profits and high interest rates "could put the ability of companies to operate their debts". "

"In addition, higher interest rates could further exacerbate the stress among bank institutions, especially those that are strongly invested in assets with a longer term and have a relatively high proportion of non-insured deposits on the overall deposits," he continued.

will the Fed "leave out" an interest increase?

When the Silicon Valley Bank (SVB) experienced a banking tower in March, after the company had announced a realized loss of $ 1.8 billion from its long-term bonds.

Ultimately, insurance coverage for the SVB did not matter, since the Federal Reserve, the Ministry of Finance and the FDIC had agreed to completely save all inserters. 400 ">."

Critics of the move Noted How the rescue measures of the central bank have a large part of its progress in trying to deprive the economy again, which was rejected, which again Could contribute assets such as Bitcoin.

The governor expressed the idea that the Fed could "keep" its key interest rate at an "upcoming session", but this should not be interpreted in such a way that the Fed "reaches the highest interest for this cycle".

"In fact, the abandoning of an interest increase would allow the committee to view more data at an upcoming session before making decisions about the extent of a further tightening of monetary policy," he concluded

rising interest rates led to a decline in Bitcoin and stocks in the course of 2022, which meant that an impending maximum interest may be bullish for the asset. That means analysis suggests that Bitcoin may not be as badly affected by interest rate increases as last year.

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