As anticipated, the U.S. Federal Reserve has maintained its benchmark fed funds rate range at 4.25%-4.50% during its recent meeting, marking the second consecutive pause following a series of three rate cuts to conclude 2024.
The Fed’s latest quarterly economic projections reveal a significant decrease in expectations for economic growth. The forecast for GDP increase in 2025 has been adjusted down to 1.7%, down from the previous estimate of 2.1% made in December. Projections for growth in 2026 and 2027 have also been revised downwards, reflecting broader concerns regarding the economic landscape.
In terms of inflation, the core Personal Consumption Expenditures (PCE) rate is now anticipated to be 2.8% for this year, a notable increase from the earlier projection of 2.5%. Meanwhile, the core inflation expectations for 2026 and 2027 remain unchanged at 2.2% and 2.0%, respectively.
The Fed’s dot plot continues to indicate an endpoint for the fed funds rate at 3.9% by the end of this year, consistent with the December forecast. Additionally, rates for 2026 and 2027 are projected to be 3.4% and 3.1%, respectively, indicating a steady outlook for the near future.
In the wake of these announcements, Bitcoin (BTC) displayed volatility immediately following the Fed’s release; it trades lower at approximately $83,500, down from just above $84,000 prior to the news.
Risk assets have faced pressure in recent weeks, as growing concerns over President Trump’s tariff threats have intensified worries about their potential effects on inflation and economic growth. The Fed’s recent shift towards a hawkish stance in both its December and January meetings has dampened expectations for looser financial conditions in the near term, creating headwinds for cryptocurrencies and stocks alike.
Fed Chair Jerome Powell is scheduled to address the public at 2:30 p.m. Eastern Time (18:30 UTC), with traders keenly monitoring the press conference for insights into the policymakers’ views on future monetary policy direction.
