by Daniel | Last Updated December 17th, 2021
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With inflation continuing to rise and cryptocurrency markets faltering, the Federal Reserve has indicate that it is going to start increasing interest rates next year.
In this article I’m going to talk about the Federal reserves decision to start reducing its pandemic stimulus measures, the Bank of England lifting its rates for the first time since the onset of the Pandemic, and talk of cryptocurrency being called a massive bubble.
Investor Rich Bernstein has warned that Bitcoin and Cryptocurrencies are one of the biggest financial bubbles ever, Whilst speaking to CNBC he said that – “Cryptos are the biggest financial bubble ever in history,” “This is just a monster one.”
He continued by saying that – “On one side, we have all that I would call the bubble assets: tech, innovation disruption, cryptocurrencies,” “On the other side of this see-saw, you have literally everything else in the world. I think if you’re looking at 2022 into 2023, you want to be in everything else in the world side of that see-saw.”
Over the past 24 months, some Cryptocurrencies have gone through the roof, with Bitcoin up almost 600% and Etherium up almost 2,500%, and this is partially due to central banks from all over the world providing cheap dept and cash in an effort to stop markets from tanking due to the Pandemic.
Some investors are now warning that the highly inflated prices may pull back sharply if and when central banks start to scale back their support.
Interestingly enough, after the Federal Reserve announced this week that it will accelerate the winding down of its pandemic stimulus measures, the price of both Bitcoin and Etherium went up.
The Fed Chair Jerome Powell basically said that the US Central Bank will cut its monthly bond-buying at twice the rate of what he said just six weeks ago.
He also said that he expects three interest rate hikes in 2022, and 2023 to try and control the increase in inflation.
He also by saying that – “We are prepared to use our tools to make sure high inflation doesn’t get entrenched,” “This is a strong economy, one in which it’s appropriate for interest rate hikes.
Speaking about the Fed decision, Marcus Sotiriou an analyst from U.K.-based digital asset broker GlobalBlock said that – “Despite these new changes in policy usually being bearish for cryptocurrencies as they are a risk-on asset class that thrives in a low-interest-rate environment, digital assets reacted positively to the meeting as it appears the news was already priced in and this greater clarity was welcomed by investors,”
On Thursday the Bank of England lifted interest rates by 15 basis points, from .1% up to .25%, which is the first time it has done so since the start of the pandemic.
Policymakers said that – “There was some value in waiting for further information on the degree to which Omicron was likely to escape the protection of current vaccines and on the initial economic effects of this new wave,” “There was, however, also a strong case for tightening monetary policy now” because of the strength on inflationary pressures in the economy.
With inflation in the UK reaching a 10 year high and the Consumer Price Index rising by an annual 5.1%, which is a lot higher than the central bank’s target of 2%.
The Bank of England expects that inflation will hover around 5% over winter and may peak at almost 6% in April of 2022.
Speaking about the rate rise, Hussain Mehdi, an investment strategist at HSBC said that the rate hike was -“fairly surprising” considering the latest outbreak of the new covid variant Omicron.
“Nevertheless, there were solid reasons for immediate action. The labor market is tight, and Omicron has the potential to exacerbate supply-side constraints in goods and labor,” “Ongoing upside inflation risks are likely to push the MPC into further action in 2022.”
According to the Bureau of Labor Statistics, Inflation in the US is rising at its fastest pace in almost 39 years.
With the Consumer Price Index up 6.8% annually in November, which just happens to be the highest 12-month increase since 1982.
A senior economist from the Credit Union National Association said that – “Inflation continued to surge in November,” “Supply chain disruptions, higher demand for goods that continue to exceed pre-pandemic levels and increases in COVID-sensitive items such as shelter contributed to the rise.”
Turkey is going to lift its minimum wage by 50% starting next year due to increased inflation and the lira crashing.
Apparently, it is the largest increase in 50 years.
The wage increase will affect almost 6 million workers and bring their current wage of $182 a month, up to $275 a month.
Speaking about the increase, Turkeys president said that – “We are determined to put an end to the uncertainty that has arisen with the recent fluctuations in the exchange rate and the exorbitant price increases as soon as possible,” “We will determine the future of this nation together with its men and women, young and old, workers and employers.”
Many companies across the US are having to change their plans due to the continued spread of the Omicron variant.
Apple has delayed its return to office for an unspecified amount of time, which is the third time it has done so.
It has also temporarily shut stores in Miami, Annapolis, Maryland, and Ottawa.
And JPMorgan has decided to take its upcoming health care conference which is supposed to start on January 10th online “out of an abundance of caution,”.