The U.S. Federal Reserve has hiked the benchmark interest rate by 75 basis points, which marks the biggest increase since 1994.
Bitcoin, the world's largest cryptocurrency, is changing hands at $20,889 on the Bitstamp exchange. The largest cryptocurrency briefly spiked by more than 4% on the news, but it then instantly erased those gains.
The U.S. dollar index has spiked to 105.79 following the announcement.
The Fed was widely expected to hike rates more aggressively after the consumer price index (CPI) recorded a year-over-year increase of 8.6%, which was a significant upside surprise for the market.
The central bank's increasingly hawkish policy is generally believed to be the main headwind for risk assets like Bitcoin.
In its statement, the Federal Open Market Committee (FOMC) stated that it remains committed to cooling inflation, signaling a faster pace of rate increases. The rate is now expected to rise to 3.8% next year. Futures on the federal funds rate are pricing in another 75 basis point hike in July.
During a press conference, Fed Chairman Jerome Powell said that the central bank had the necessary tools to restore price stability. However, the central bank continues to see risks for inflation to the upside. "We at the Fed understand the hardship that high inflation is causing. We're strongly committed to bringing inflation back down, and we're moving expeditiously to do so," Powell said.
The Fed head says that the pace of rate hikes will largely depend on incoming data.