Bitcoin, Ethereum Waver as Fed Holds Interest Rates Steady

In brief

• The Federal Reserve held interest rates steady for a second consecutive meeting.
• The decision was split, with one member of the FOMC calling for a cut.
• The central bank noted that the implications of conflict in the Middle East are “uncertain” for the U.S. economy.

The Federal Reserve held its benchmark interest rate steady on Wednesday, maintaining a cautious stance as rising energy costs threaten to complicate its ability to balance persistent price pressures with a cooling job market in the U.S.

The federal funds rate remained unchanged at a target range 3.50% to 3.75%. The decision, which was widely expected, prolonged a pause that began at the conclusion of the Fed’s policy meeting in January, following a series of interest rate cuts late last year.

Bitcoin recently changed hands around $71,870, a 3.6% decrease over the past day, according to CoinGecko. Over the same period of time, Ethereum had fallen 5.3% to $2,215. Still, both cryptocurrencies showed gains of 1.6% and 7.2%, respectively, over the past week.

Voting members of the Federal Open Markets Committee (FOMC) were split for a sixth policy meeting in a row. Although most rallied around the idea of leaving borrowing costs untouched, Stephen Miran advocated for a 25-basis-point interest rate cut.

In its official statement, the FOMC noted that “inflation remains somewhat elevated” and job gains have remained low, even as the unemployment rate ticked up to 4.4% in February.

The Fed highlighted a data-dependent approach to future interest rate cuts, underscoring a “wait-and-see” approach that crystallized among most policymakers in January.

The backdrop surrounding the Fed’s latest policy meeting was marked by the U.S.-Israel war with Iran, which has caused energy prices to surge in recent weeks. Earlier in the day, Bitcoin fell alongside U.S. stocks on reports that the world’s largest gas field was struck in Iran.

“Uncertainty about the economic outlook remains elevated,” the FOMC said. “The implications of developments in the Middle East for the U.S. economy are uncertain.”

The Fed typically focuses on underlying inflation in the U.S. economy, preferring a gauge that strips out volatile food and energy costs. In the 12 months ended January, the Personal Consumption Expenditures Price Index rose 3.1%, up from 3% a month prior.

For its latest projections on the U.S. economy, policymakers’ median forecast for core PCE rose to 2.7% from 2.5% in December. At the same time, the median projection for the federal funds rate at the end of 2026 remained unchanged at 3.4%.

Wednesday’s gathering was unique in the sense that it was Powell’s penultimate policy announcement. His four-year term will end in May, with former Fed Governor Kevin Warsh expected to succeed him, if confirmed by the U.S. Senate.

During a post-decision press conference, Powell warned that higher energy prices are likely to “push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy.”

Regarding projections on the federal funds rate, which still implied one rate cut this year, Powell described an underlying shift. A handful of policymakers went from projecting two cuts to one cut, he noted, indicating a hawkish slant.

For much of President Donald Trump’s second term, the president has pressured Powell to lower interest rates. In January, that tension was heightened by the revelation of a criminal investigation into Powell regarding renovations at the Fed’s headquarters. Last Friday, a judge blocked the Justice Department’s subpoena requests, saying the government had provided “essentially zero evidence” of Powell’s alleged crimes.

Editor’s note: This story was updated after publication with additional details. It was also corrected to note that just one member advocated for a rate cut.

Daily Debrief Newsletter

Start every day with the top news stories right now, plus original features, a podcast, videos and more.

Source: https://decrypt.co/361603/bitcoin-ethereum-waver-fed-holds-interest-rates-steady