The U.S. Federal Reserve left interest rates unchanged at 3.5%–3.75%, marking its second consecutive pause as policymakers navigate an increasingly uncertain macro environment. While the decision itself was widely expected, the tone of the meeting – and especially Chair Jerome Powell’s remarks – sent a clearer message: caution is back in control.
Officials continue to project just one rate cut this year, but emphasized that policy is not on a preset path. With geopolitical tensions rising and inflation still above target, the Fed signaled it is in no rush to ease.
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Inflation Concerns Return to the Forefront
A key driver behind the Fed’s stance is inflation, which remains stubbornly elevated. Policymakers now expect inflation to reach around 2.7% this year, higher than previous forecasts, with energy prices playing a growing role due to ongoing conflict in the Middle East.
Powell made it clear that recent developments – particularly rising oil prices – could delay progress on disinflation. While the labor market shows signs of softening, it has not weakened enough to force the Fed’s hand.
The result is a familiar but uncomfortable setup: inflation still too high, growth still resilient, and no clear justification for aggressive rate cuts.
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Crypto Reacts to “Higher-for-Longer” Reality
Crypto markets responded negatively to the decision and, more importantly, to the Fed’s cautious outlook. Bitcoin slipped toward $71,000, while Ethereum and other major assets posted sharper losses.
Despite improving sentiment earlier in the week, markets quickly repriced expectations as it became clear that rate cuts are not imminent.
Looking ahead, the path for crypto – and risk assets more broadly – will depend heavily on incoming data. Inflation prints, labor market updates, and developments in energy markets will all shape expectations for the Fed’s next move.
