On Tuesday (April 5), concern about the high inflation in the U.S. expressed by two Federal Reserve (“Fed”) offcials appeared to causes losses in both the U.S. stock market and the crypto market.
“Currently, inflation is much too high and is subject to upside risks,” she said in prepared remarks. “The [Federal Open Market] Committee is prepared to take stronger action if indicators of inflation and inflation expectations indicate that such action is warranted...
“The [FOMC] will continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting,” she said. “Given that the recovery has been considerably stronger and faster than in the previous cycle, I expect the balance sheet to shrink considerably more rapidly than in the previous recovery, with significantly larger caps and a much shorter period to phase in the maximum caps compared with 2017-19.“
Also, Mary Colleen Daly, “an American economist, who became the 13th President and chief executive officer of the Federal Reserve Bank of San Francisco on October 1, 2018”, told a meeting of the Native American Finance Officers Association in Seattle:
“Most Americans, most people, most businesses, hopefully people in tribal nations, you all have confidence that we’re not going to let this go forever… But if you don’t have that confidence, let me give it to you.“
She also mentioned that the Fed’s upcoming interest rate hikes are “necessary” to ensure that when people go to bed at night, they don’t have to worry about “whether prices will be higher, considerably higher tomorrow.”
As CNBC pointed out, investors in stocks and crypto did not like hearing these comments, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite falling 2.26% (to 14,204.17), 0.8% (to 34,641.18), and 1.26% (to 4,525.12) respectively.
Mark Zandi, chief economist at Moody’s Analytics told CNBC’s “Power Lunch”:
“Ultimately, the way this is going to work, the economy is going to slow, the stock market has to reflect that. So I do expect the stock market to have a tough few months here as it ultimately adjusts to what the Fed is doing and will do going forward.“
Keith Lerner co-CIO and chief market strategist at Truist, told CNBC:
“The way the market is acting today, the playbook is defense with commodities-linked sectors outperforming, while technology underperforms on the concern of high interest rates. There’s concern about the economy and the Fed’s ability to maneuver a soft landing.“
As for the crypto market, the losses were led by Bitcoin, which — according to data by TradingView — fell to as low as $45,565 (by 19:15 UTC) yesterday on crypto exchange Bitstamp.
Per data by CryptoCompare, currently (as of 8:50 a.m. on April 6), Bitcoin is trading around $45,380.
The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.