Étienne Girard
In its first policy meeting since President Donald Trump took office, the Federal Open Market Committee (FOMC) decided to keep the federal funds rate unchanged within the 4.25% to 4.50% range. Additionally, the central bank announced plans to slow the pace of quantitative tightening (QT).
“Economic activity continues to expand at a steady rate,” the Federal Reserve stated on Wednesday. “Labor market conditions remain robust, while inflation is still elevated.”
The Fed also acknowledged rising economic uncertainty, emphasizing its commitment to balancing both aspects of its dual mandate—maximum employment and price stability.
Starting in April, the Fed will adjust its approach to reducing securities holdings:
- The monthly redemption cap on Treasury securities will drop from $25 billion to $5 billion.
- The cap on agency debt and mortgage-backed securities will remain at $35 billion per month.
- The FOMC forecasts two rate cuts by the end of the year.
Market Expectations and Investor Sentiment
Fed Chair Jerome Powell is set to address the public in a press conference at 2:30 p.m. ET. Meanwhile, CME FedWatch data indicates a 16% chance of a rate cut in May, with the probability increasing significantly by June.
With investors anticipating lower interest rates, risk assets, including cryptocurrencies, have seen renewed speculative interest.
“Polymarket bettors expect the Fed to halt QT before May,” said Nic Puckrin, financial analyst and founder of The Coin Bureau. “But they may be disappointed, as the Fed typically avoids monetary expansion until rates approach zero.”
Instead, Puckrin suggests that monetary stimulus may come from China or Europe, both of which have already implemented easing measures. Earlier this month, China injected 300 billion yuan into the economy through special treasury bonds.
Impact of Trade Tariffs on Monetary Policy
While Trump has pressured Powell to lower interest rates, the Fed remains committed to a data-driven approach.
“Despite Trump’s push for lower rates, Powell has held firm,” said Nathan Cox, CIO of Two Prime Digital Assets. “At the same time, the administration’s trade policies are driving prices higher.”
Currently, the U.S. has tariffs in place on Canada, Mexico, and China, with new import tariffs expected next month. These trade measures have exacerbated market volatility, creating challenges for traditional financial markets.
Bitcoin and Crypto Markets React
While equity markets struggle with economic and geopolitical uncertainty, BTC continues to outperform traditional assets.
Matt Hougan, CIO of Bitwise, noted that BTC often experiences sharp rebounds following market downturns, a trend he calls “dip then rip.”
“BTC has historically surged by an average of 190% after major stock market drawdowns,” said Hougan.
On Wednesday morning, crypto markets received an additional boost after Ripple CEO Brad Garlinghouse announced that the company’s legal dispute with the SEC had concluded. As a result:
- XRP jumped 12%.
- Bitcoin gained 3.5%.
- Ethereum and Solana surged between 7-9%.
What’s Next for Crypto and Traditional Markets?
Despite the recent crypto market recovery, some analysts believe short-term relief may be temporary.
“We might see an oversold bounce, but tariffs will be the dominant market driver in the near term,” said Cox.
Meanwhile, analysts at Bernstein believe the BTC bull cycle is still in its early stages.
“We anticipate Bitcoin reaching $200,000 by late 2025,” the firm wrote. “However, if macroeconomic concerns and political risks persist, the bull run may extend into 2026.”
With growing speculation over monetary policy, global trade tensions, and crypto market movements, investors remain focused on the Fed’s next steps and broader economic trends.
