- The Federal Reserve paused its interest-rate increases – for now – on Wednesday.
- Over the past 15 months, its monetary-tightening campaign fueled wild swings for stocks, bonds, and cryptocurrencies.
The Federal Reserve has paused its monetary-tightening campaign – for now.
The central bank didn't raise interest rates at the end of its June meeting Wednesday, opting not to lift borrowing costs for the first time in over 15 months.
Stocks, bonds, and cryptocurrencies have all swung wildly over that period – and these five charts capture some of that chaos.
15 months of rate hikes
On March 16, 2022, the Fed raised interest rates for the first time in over two years in a bid to tame inflation, which was soaring toward four-decade highs.
Over the next year and three months, it lifted borrowing costs from near-zero to over 5%, tightening at 10 consecutive meetings before Wednesday's pause.
It's the central bank's fastest hiking cycle in four decades, according to data from Statista – and Jerome Powell and co.'s aggressive campaign to curb soaring prices appears to finally be working, with inflation falling from nearly 9% to just 4% over the past year.
Stock-market chaos
But there are always costs when the Fed tries to bring inflation back down to earth.
When interest rates rise, stocks tend to fall because investors are able to earn better returns by parking their cash in a savings account, rather than buying shares in listed companies.
The three US benchmark indices – the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average – all plunged as the Fed ramped up its tightening campaign, with the tech-heavy Nasdaq even entering bear-market territory by sliding over 20%.
But after bottoming out in October 2022, they've enjoyed a major rebound – powered higher by the expectation that the Fed will cut rates to support the economy later this year, as well as a ChatGPT-fueled craze that's inspired investors to pile into artificial intelligence stocks.
The three indices now trade close to their March 2022 levels – but there have still been high-profile stock-market casualties over the past 15 months.
Most notably, the Fed's rate hikes have cratered regional lenders' share prices, with the collapse of Silicon Valley Bank three months ago driving massive outflows.
San Francisco's First Republic plunged towards zero before its rescue by JPMorgan Chase on May 1 – while Beverly Hills-based PacWest and Phoenix's Western Alliance have both seen over half of their total market capitalization wiped out since the Fed's first hike.
Bond yields spike
Bond prices also tend to slide when interest rates rise, again because would-be buyers can earn higher yields by depositing their cash in a bank.
In September, global bonds fell into their first bear market in more than a generation with central banks across the world battling to keep up with the Fed – and US Treasurys have felt the pain as well.
Yields on 2-year and 10-year notes – which rise to reflect prices falling – have spiked around 200 basis points since March 2022.
Crypto's brutal sell-off
Spare a thought for crypto investors in all this, too.
While the asset class didn't exist the last time the Fed hiked rates aggressively, bitcoin and ethereum both slumped as it pressed ahead with its tightening campaign – because as borrowing costs rise, investors have less cash to pour into risky assets.
Bitcoin currently trades at nearly $26,000 and ethereum at just over $1,700 – both more than 60% below the all-time highs they hit in November 2021.