Fed’s Collins warns higher rates may be needed. What does it mean for crypto?

Federal Reserve Bank of Boston President Susan Collins has warned that higher interest rates may sometimes be necessary to control inflation, even as borrowing costs continue to make housing less affordable across the United States.

Summary

• Boston Fed President Susan Collins said higher interest rates may sometimes be necessary to control inflation, despite making housing more expensive.
• Collins argued that tighter monetary policy can hurt housing construction and mortgage demand but helps maintain price stability over the longer term.
• Bitcoin fell below $70,000 as investors weighed inflation concerns and the possibility of further Federal Reserve interest rate hikes.
• US spot Bitcoin ETFs recorded nearly $300 million in withdrawals on November 11, with BlackRock’s IBIT accounting for most of the outflows.

In her November 13 speech at the Boston Fed’s 70th Economic Conference, Collins acknowledged that tighter monetary policy can hurt homebuyers and construction activity but argued that keeping inflation under control provides lasting benefits for the economy.

“In the near term, the higher interest rates sometimes needed to cool the economy and keep inflation in check can make homes more expensive to buy and to build,” Collins said.

She added that stable prices create more predictable economic conditions over the longer term, which ultimately benefit the housing market.

Her comments come as investors increasingly expect another Federal Reserve interest rate hike in December, with Bitcoin and other cryptocurrencies already under pressure from persistent inflation and weakening institutional demand.

Fed’s Collins says tighter policy can benefit housing over time

During her remarks, Collins pointed to the difficulties facing American households after several years of rising property prices and borrowing costs.

She said the surge in home prices since the pandemic, combined with higher mortgage rates since early 2022, has pushed homeownership beyond the reach of many Americans.

The problem has affected businesses as well. According to Collins, employers across New England have struggled to recruit workers because suitable housing is either unavailable or too expensive.

She cited cases involving physicians, mechanics, scientists and hospitality workers who withdrew from job opportunities because they could not find affordable places to live.

Housing construction has faced its own difficulties, with some projects slowing or stalling because of shortages of skilled construction workers.

Collins explained that monetary policy can have an unusually large influence on housing because both construction investment and mortgage demand are sensitive to interest rates.

Although tighter policy can limit new housing supply and discourage mortgage borrowing, she maintained that controlling inflation sometimes requires such measures.

“Tighter policy is needed at times to ensure price stability,” Collins said, pointing to the longer-term benefits for housing and the economy.

What could higher interest rates mean for Bitcoin and crypto?

The remarks arrive during a difficult period for cryptocurrencies, with expectations of further monetary tightening weighing on investor sentiment.

Bitcoin fell below $70,000 on November 13, trading near $69,300 as selling pressure continued across risk assets. Ethereum slipped toward $1,950, while technology stocks faced similar weakness.

Higher interest rates generally make Treasury securities and other interest-bearing investments more attractive, potentially reducing demand for cryptocurrencies that do not provide comparable fixed income.

The pressure has become more visible since the latest US inflation report.

As crypto.news previously reported, Bitcoin fell below $74,000 on November 10 after consumer prices rose 0.4% in October, exceeding economists’ expectations of 0.3%.

Core inflation, which excludes food and energy, rose 0.3%, compared with forecasts of 0.2%.

The stronger-than-expected figures prompted traders to reconsider how aggressively the Fed might raise borrowing costs at its December meeting.

On November 10, Polymarket traders assigned an 85% probability to a quarter-point increase, with another 12.7% assigned to a larger move.

Deutsche Bank has taken a similarly cautious view, forecasting three consecutive quarter-point rate hikes in December, January and March, which would take the federal funds target range to 4.50%–4.75%.

Institutional cryptocurrency investment has weakened alongside those expectations.

US spot Bitcoin ETFs recorded $299.9 million in net withdrawals on November 11, with BlackRock’s IBIT accounting for $269.73 million.

The withdrawals brought total outflows to roughly $1.44 billion across five consecutive trading sessions, while Ethereum ETFs lost another $144.81 million that day.

The Federal Reserve’s next interest rate decision is scheduled for December 9. Investors will receive the minutes of its October policy meeting on November 18, followed by the October personal consumption expenditures inflation report on November 25.