Federal Reserve Holds Interest Rates Amid Economic Uncertainty

Fed Holds Rates Steady as Economic Concerns Grow

The Federal Open Market Committee (FOMC) has maintained interest rates at 4.25%-4.5% for the second straight meeting, aligning with market expectations amid growing recession fears linked to President Trump’s new trade policies.

The CME Group’s FedWatch Tool had already signaled a 99% probability that the central bank would hold rates steady, reinforcing investor confidence in the decision.

However, the Fed has revised its economic forecasts for 2025, reflecting heightened economic risks:

📉 GDP growth projection lowered from 2.1% to 1.7%.

📈 Unemployment forecast increased from 4.3% to 4.4%.

📊 PCE inflation expectations rose from 2.5% to 2.7%, with core PCE inflation now expected at 2.8%.

Despite holding rates steady, the Fed maintains its projection of two 50-basis-point rate cuts in 2025, aligning with its December outlook.

Powell’s Speech: What’s Next for Monetary Policy?

Fed Chair Jerome Powell is set to speak shortly, with markets eagerly awaiting his stance on interest rates, inflation, and trade policies.

This meeting marks the first FOMC gathering since Trump’s trade tariffs on China, Mexico, and Canada went into effect.

• In January, the Fed flagged these tariffs as a potential economic risk, citing their possible impact on consumer prices and trade relations.

• Some economists fear that increased tariffs could drive up inflation, potentially delaying future rate cuts.

Trump himself has not ruled out the possibility of a recession, while Treasury Secretary Scott Bessent recently admitted he could not guarantee that the U.S. would avoid one.

With markets pricing in future rate cuts, Powell’s tone and outlook will be key in determining how investors react.

Bitcoin’s Potential Role in a Recession

Amid concerns over economic slowdown, Bitcoin’s long-term value proposition is once again coming into focus.

BlackRock’s Global Head of Digital Assets, Robbie Mitchnick, sees Bitcoin as a potential beneficiary of a recession, explaining that liquidity injections and monetary stimulus tend to boost BTC’s price.

“Bitcoin is long liquidity in the system. It’s catalyzed by more fiscal spending, debt accumulation, and monetary stimulus,” Mitchnick said on Yahoo Finance’s Market Domination Overtime.

• Bitcoin is often compared to gold, acting as a non-sovereign, decentralized asset.

• Lower interest rates and increased money supply could drive more capital into Bitcoin, just as they do with traditional store-of-value assets.

• Despite short-term volatility, BTC is still up 15% since November.

Market Outlook: The Next Move for Bitcoin & Equities

With the Fed’s decision already priced in, markets now shift focus to Powell’s language regarding:

• The timing of future rate cuts.

• The Fed’s stance on inflation trends.

• The impact of Trump’s trade policies on economic stability.

If Powell leans dovish, signaling that rate cuts could come sooner than expected, Bitcoin and equities could rally.

However, if he maintains a cautious stance, emphasizing ongoing inflation risks and trade uncertainty, markets may see further volatility.