The US Federal Reserve has held interest rates steady at 4.25 %–4.50 % in its June 18 FOMC decision, marking the fourth consecutive pause since December 2024.
Markets widely expected the move. CME FedWatch data showed a 99.9% probability of a rate hold heading into the meeting. Cooling inflation, resilient labor markets, and ongoing trade-related price risks shaped the decision.
Fed’s Interest Rate Continues to Frustrate US Markets
Bitcoin held near $105,000 after the announcement, while Ethereum traded near $2,500. However, broader crypto sentiment may weaken as the Fed reinforces a higher-for-longer stance.
The Fed released its updated Summary of Economic Projections and dot plot alongside the decision.
FOMC participants now expect only one rate cut in 2025, down from two projected in March. Most policymakers kept their 2025 forecast aligned with current levels, signaling tighter policy will persist longer.
The dot plot also showed a slow path to normalization:
- In 2026, the majority expect rates around 3.25%–3.50%.
- By 2027, projections converge toward 2.75%–3.00%, approaching the Fed’s long-run neutral rate.
- The longer-run dots remain near 2.5%, suggesting no major shift in structural expectations.
This marks a notable hawkish shift. Only four participants projected any cut in 2025, underscoring the Fed’s caution amid sticky services inflation and tariff-driven price risks.
Fewer cuts this year mean capital will remain expensive. That dampens liquidity inflows into speculative assets like altcoins and DeFi tokens. The stronger dollar narrative also puts pressure on crypto valuations.
Bitcoin dominance could rise in the short term, as institutional traders de-risk from altcoins and rotate into higher-quality assets. At the same time, interest may grow in yield-generating products like staked ETH or tokenized US treasuries.
Unless economic data worsens or inflation softens sharply, crypto markets are unlikely to see significant upside from Fed policy in the near term.
The Fed last raised rates in July 2023. Since then, inflation has steadily declined from 5.3% to 2.4% as of June, approaching the Fed’s 2% target. But services inflation and tariff-related costs remain sticky.
Crypto markets are especially sensitive to Fed signals. Lower rates typically boost liquidity and risk appetite, driving capital into Bitcoin, Ethereum, and altcoins.
Conversely, a prolonged high-rate environment limits upside potential.
With economic concerns heating up due to the Iran-Israel conflict, rate policy is also becoming a political issue. Donald Trump has openly pressured the Fed to cut faster, while current policymakers remain cautious.
Looking ahead, the July 31 FOMC meeting will likely hinge on June inflation and jobs data. For now, crypto traders will dissect every word from Powell for guidance on the Fed’s timing — and tolerance for market volatility.
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