The Fed hit a pause on rate hikes for the second time under Trump’s leadership, keeping them steady at 4.25%–4.50%, and the crypto market wasted no time bouncing back! With a $2.9 trillion comeback, investors are now eyeing potential rate cuts after the Fed tweaked its GDP forecast. This decision comes as the central bank continues to monitor economic conditions, inflation, and job growth. The Fed now expects fewer rate cuts this year, with only 11 out of 19 FOMC members seeing at least two cuts, down from 15 in December.
Slower Reduction of Balance Sheet Starts in April
Crypto analyst MartyParty highlights that the Federal Reserve will slow Quantitative Tightening (QT) starting April 1st, just as he predicted. This means the Fed will reduce the pace of balance sheet reductions, signaling a shift in monetary policy.
As per the plans, they will cut monthly Treasury redemptions from $25 billion to $5 billion while keeping the limit for agency debt and mortgage-backed securities (MBS) at $35 billion. This move is aimed at maintaining financial stability while gradually reducing the Fed’s holdings.
Crypto Impact
One crypto analyst Fefe Demeny points out that Quantitative Tightening (QT) isn’t ending soon, despite some crypto traders expecting a bull run once Quantitative Easing (QE) begins. While, Powell confirmed that the Fed will slow QT again but extend it for a longer period, meaning liquidity won’t flood back into the markets as quickly as some hoped.
Santiment highlighted that though Powell confirmed expectations for two rate cuts later this year, economic growth is now projected to slow to 1.7%, down from the previous 2.1% forecast. Inflation remains a concern, especially with new tariffs potentially delaying price stability. Following the announcement, both crypto and equities reacted positively, with Santiment noting that crypto markets may continue to mirror the S&P 500, though altcoins could experience increased volatility.
Meanwhile, The crypto market rebounded before the Fed meeting, hitting a $2.9T market cap. Bitcoin soared past $85K, while ETH, SOL, and XRP gained 5%, 7%, and 10%. Hype is building around Trump’s upcoming DAS speech on crypto policy.
Powell Warns of Inflation and Consumer Weakness
However, Fed Chair Jerome Powell noted that the U.S. economy remains strong, but there are signs that consumers may be struggling. Inflation, while lower than before, is still somewhat high. Powell also warned that new tariffs and global economic shifts could slow down progress in reducing inflation. However, he reassured that the Fed will closely monitor the situation and adjust policies if needed.
