The Federal Reserve decided to keep interest rates steady today, maintaining the federal funds rate between 4.25% and 4.50%. This marks the second consecutive meeting without a change, amid rising recession fears linked to the economic policies of the Trump administration.
The Fed has revised its economic forecasts for 2025. It lowered GDP growth expectations from 2.1% to 1.7%. Unemployment forecasts increased slightly from 4.3% to 4.4%. Additionally, projections for PCE inflation rose from 2.5% to 2.7%, and core PCE inflation estimates increased from 2.5% to 2.8%.
The Fed anticipates two interest rate cuts of 50 basis points in 2025, aligning with market expectations. The decision to hold rates steady was widely expected, with a 99% probability indicated by the CME Group’s FedWatch Tool.
In its statement, the Fed acknowledged a strong labor market but expressed concerns about ongoing inflation and global economic issues. The central bank plans to monitor inflation and labor market data closely before making any policy changes. Fed Chairman Jerome Powell emphasized this cautious stance, stating that the economy is strong but does not require immediate adjustments.
Markets are looking forward to Powell’s upcoming remarks for insights on future rate changes and the impact of economic risks. This meeting is significant as it follows the implementation of Trump’s trade policies, which have raised concerns about potential economic strain.
Economists warn that these tariffs could hinder inflation progress by increasing consumer prices and provoking retaliation. Recent inflation data shows a cooling trend, with the consumer price index rising only 0.2% in February, lowering the annual rate to 2.8%.
In the backdrop of these economic concerns, discussions about Bitcoin are gaining traction. BlackRock’s Robbie Mitchnick suggests that a recession could benefit Bitcoin, as increased liquidity and monetary stimulus may drive its value. Despite recent market fluctuations, Bitcoin has risen about 15% since November.
