Fed Keeps Rates Unchanged, Signals Economic Uncertainty

As widely expected, the U.S. Federal Reserve announced on March 20, 2025, that it would maintain its benchmark interest rate at a range of 4.25% to 4.50%, citing ongoing economic uncertainty and a strong labor market.

This decision marks the first Federal Open Market Committee (FOMC) meeting since President Donald Trump returned to office. Alongside keeping rates steady, the Fed also signaled a slowdown in its quantitative tightening policy, reflecting heightened caution over the broader economic outlook.

“Recent indicators suggest that economic activity has continued to expand at a solid pace,” the Fed stated. “The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.”

However, the central bank also acknowledged rising uncertainty, with the statement noting: “The Committee is attentive to the risks to both sides of its dual mandate.”

Fed to Scale Back Quantitative Tightening in April

In a key shift, the FOMC announced that starting in April, it would slow the pace of balance sheet reduction. Specifically:

• The monthly redemption cap for Treasury securities will be lowered from $25 billion to $5 billion.
• The cap on agency debt and mortgage-backed securities will remain unchanged at $35 billion per month.
• The Fed forecasts two rate cuts before the end of 2025, although exact timing remains uncertain.

Fed Chair Jerome Powell is scheduled to hold a press conference at 2:30 p.m. ET, where he is expected to clarify the Fed’s stance on interest rate policy and inflation control measures.

Market Expectations for Rate Cuts Rise

The CME FedWatch tool, which tracks market expectations for rate changes, currently indicates a 16% probability of a rate cut in May, with the likelihood rising significantly in June.

With traders increasingly betting on monetary easing later this year, risk assets, including cryptocurrencies, have seen renewed speculative interest.

Nic Puckrin, founder of The Coin Bureau, commented on the market’s expectations:

“Investors are already salivating at the prospect of quantitative easing, but they will likely be disappointed soon.”

Puckrin noted that the Federal Reserve typically refrains from aggressive monetary stimulus unless interest rates are near zero, suggesting that if major stimulus policies emerge, they may come from China or Europe instead of the U.S.

Earlier this month, China expanded fiscal stimulus by issuing 300 billion yuan in special treasury bonds to boost domestic consumption, highlighting a more proactive approach to economic support.

Trump Administration’s Influence on Fed Policy

President Donald Trump has previously urged Fed Chair Jerome Powell to lower rates, but Powell has maintained his data-dependent stance, resisting political pressure to accelerate rate cuts.

According to Nathan Cox, CIO of Two Prime Digital Assets, the White House’s economic policies may indirectly counteract the Fed’s monetary strategy.

“While Trump has pressured Powell to lower rates, the Commissioner hasn’t budged,” Cox said. “At the same time, the administration’s trade wars and tariffs are creating upward price pressure, which complicates inflation control.”

Currently, the U.S. maintains tariffs on key trading partners, including:

• Canada and Mexico: 25% tariffs on commodities, 10% on energy products and potash.
• China: 10% across most imports, with new tariffs reportedly under consideration.

White House aides are reportedly preparing additional tariffs next month, further contributing to economic uncertainty in global trade.

Bitcoin Outperforms Amid Market Volatility

Despite uncertainty in traditional financial markets, Bitcoin has continued to outperform other asset classes. The cryptocurrency has shown strong resilience, with investors eyeing potential rate cuts as a bullish catalyst for digital assets.

As the Fed’s policy trajectory remains unclear, the crypto market will closely watch for signals from Powell’s upcoming statements and future FOMC meetings, which could determine the direction of both interest rates and digital asset investments in the coming months.