Federal Reserve Boston Chair Susan Collins warned that in order to control inflation, higher interest rates may sometimes be necessary, despite the ongoing increase in borrowing costs making housing more unaffordable for Americans.

• Boston Fed Chair Susan Collins stated that although higher interest rates will make housing more expensive, they may sometimes be necessary to control inflation.
• Collins stated that tighter monetary policies would harm housing construction and the demand for mortgages, but in the longer run, they would help to maintain price stability.
• As investors weigh inflation concerns against the possibility of further interest rate hikes by the Federal Reserve, Bitcoin fell below $70,000.
• On November 11th, US spot Bitcoin ETF experienced nearly $300 million in capital outflows, with BlackRock's IBIT accounting for the majority of it.

In her speech at the 70th Federal Reserve Economic Conference in Boston on November 13, Collins acknowledged that tighter monetary policies would harm homebuyers and construction activities, but she believed that controlling inflation could bring lasting benefits to the economy.

"In the short term, in order to cool down the economy and control inflation, sometimes higher interest rates are necessary, which will make the cost of purchasing and building housing more expensive," Collins said.

She added that stable prices would create a more predictable economic environment over a longer period of time, which would ultimately be beneficial to the housing market.

At the time of her remarks, investors were increasingly anticipating that the Federal Reserve would raise interest rates again in December, while Bitcoin and other cryptocurrencies were under pressure due to ongoing inflation and weakening institutional demand.

Collins stated that stricter policies may be beneficial for housing in the long run.

In his speech, Collins mentioned the difficulties faced by American residents in recent years due to rising housing prices and borrowing costs.

She said that since the pandemic, housing prices have soared, and coupled with higher mortgage interest rates since the beginning of 2022, it has become difficult for many Americans to afford to buy a home.

This issue has also affected businesses. Collins stated that employers across New England are facing difficulties in hiring staff, as suitable housing is either difficult to find or too expensive.

She gave examples of doctors, mechanics, scientists, and hotel industry employees who have given up job opportunities because they couldn't find affordable housing.

Housing construction also faces its own difficulties; some projects have slowed down or come to a standstill due to a shortage of skilled construction workers.

Collins explained that monetary policy has an exceptionally large impact on housing, as both construction investment and the demand for mortgage loans are highly sensitive to interest rates.

Although stricter policies will limit new housing supply and curb mortgage lending, she insists that sometimes such measures are necessary to control inflation.

"Sometimes more stringent policies are needed to ensure price stability," Collins said, pointing out the long-term benefits for housing and the economy.

What does a higher interest rate mean for Bitcoin and cryptocurrencies?

As expectations of interest rate hikes rise, these remarks come at a difficult time for cryptocurrencies, with the prospect of further tightening monetary policy continuing to dampen investor sentiment.

On November 13th, Bitcoin fell below $70,000, with trading prices approaching $69,300, and risky assets continued to face pressure. Ethereum also dropped to around $1,950, and tech stocks exhibited a similar weak performance.

Normally, higher interest rates would make U.S. Treasury bonds and other interest-bearing assets more attractive, which could potentially reduce the demand for cryptocurrencies that do not offer similar fixed returns.

This pressure became even more apparent after the release of the latest U.S. inflation report.

As previously reported by crypto.news, on November 10th, following a 0.4% increase in consumer prices in October, which was higher than the economists' expected 0.3%, Bitcoin fell below $74,000.

Excluding food and energy, core inflation rose by 0.3%, higher than the expected 0.2%.

Data that exceeded expectations has prompted traders to re-evaluate the possibility that the Federal Reserve may raise borrowing costs more aggressively at its December meeting.

On November 10th, trader Polymarket estimated a 85% probability of the Federal Reserve raising interest rates by 25 basis points, with another 12.7% betting on a more substantial increase.

Deutsche Bank also holds a similarly cautious view, anticipating three consecutive interest rate hikes of 25 basis points in December, January, and March, which will push the federal funds target range up to 4.50% to 4.75%.

As these expectations heat up, institutional investment in crypto is also weakening.

On November 11th, there was a net outflow of $299.9 million in spot Bitcoin ETF from the United States, of which BlackRock IBIT had an outflow of $269.73 million.

This resulted in a total outflow of approximately $1.44 billion over five consecutive trading days; on that day, Ethereum ETF also saw an outflow of $144.81 million.

The Federal Reserve's next interest rate decision is scheduled for December 9th. Investors will see the minutes of the October policy meeting on November 18th, followed by the October Personal Consumption Expenditures Price Index report on November 25th.