Fed raises rate to 4%, Bitcoin climbs above $86,000 as Lee predicts rally

The Federal Reserve increased its federal funds target rate by 25 basis points, bringing it to a range of 3.75% to 4%. Despite the rate hike and the recent failure of the CLARITY Act in the Senate, Bitcoin‘s price rose significantly, moving from below $76,000 to above $86,000. S&P 500 futures, meanwhile, stabilized following a brief period of losses.

Tom Lee highlights peak hawkishness

Tom Lee, head of research and Chief Investment Officer at Fundstrat Global Advisors, commented that the Federal Reserve may have reached the height of its hawkish stance on inflation and interest rates. He anticipates that the central bank could soon adopt a softer tone, especially if there are changes in the way inflation is calculated.

Lee asserts that, “the Fed cannot get much more hawkish from here, and upcoming data could give officials room to walk back their stance.”

The Federal Reserve is reportedly considering adjustments to its preferred inflation gauge, which could suggest that inflation is lower than previously estimated. Such a shift might increase the appeal of cryptocurrencies like Bitcoin to investors seeking alternatives to traditional assets.

Market and institutional reactions

Goldman Sachs analysts have noted that the S&P 500 typically declines by around 2% in the three months following a rate hike. Additionally, Yardeni Research recently lowered its market targets after 10-year Treasury yields surpassed 5%.