Key Takeaways
- Rates Frozen: The Federal Reserve (FED) maintains a 4.25%-4.50% benchmark rate for the fourth straight meeting.
- Inflation Bump: 2025 Personal Consumption Expenditures (PCE) projection raised to 3% amid tariff pressures.
- Cuts Delayed: Two 2025 rate cuts are still penciled in, but with “low conviction.”
- Crypto Calm: BTC holds $105K (at the time of writing) as traders dismiss stagflation risks.
The Fed’s Waiting Game
Jerome Powell’s Federal Reserve (FED) is playing a game of economic Twister: one hand using tariffs to prop up inflation; the other hand extending to lower interest rates to cushion slowing growth. Wednesday’s decision to hold rates steady while forecasting a couple of cuts in 2025 highlighted a central bank caught in the middle of Trump’s trade wars (which could materially elevate prices) and weakening GDP (with Gross Domestic Product now projected at just 1.4%).
Think of the Fed as a chef who won’t add seasoning until he tastes the tariff soup.
What Changed in the Dot Plot?
1. Grimmer Outlook
- Inflation: Year-end personal consumption expenditures (PCE) forecast up to 3% (from 2.7% in March).
- Growth: 2025 Gross Domestic Product (GDP) estimate cut to 1.4% (was 1.7%).
- Jobs: Unemployment is seen hitting 4.5% by December.
2. Divided Committee
- 7 of 19 policymakers want no cuts at all in 2025.
- Powell admits projections are “very, very hard” to trust amid tariff chaos.
3. Crypto Implications
- Stablecoins benefit from prolonged higher rates (yield-bearing assets).
- Bitcoin (BTC)’s correlation with stocks weakens as the Fed ignores Trump’s “cut rates now!” demands.
The Tariff Wild Card
Powell’s blunt warning: Consumers will soon foot the bill for Trump’s import taxes, with “meaningful inflation” likely by Q3. Yet the Fed refuses to act until it sees:
- Actual price passthrough from tariffs
- Whether retailers or manufacturers absorb costs
Markets yawned, S&P 500 flatlined, while crypto barely flinched. Traders priced this in months ago.
What’s Next on This Show?
All eyes now turn to the Feds’ September 16-17 meeting as the most likely opportunity for the first possible rate cut, but Powell cautioned that this will depend on data. The decision will depend on whether the inflation will materialize from tariffs or if an already weakening economy forces the Fed’s hand sooner rather than later. Meanwhile, political tensions continue to brew as Powell cleverly danced around questions about extending his term beyond May 2026, leaving people and markets wondering who will lead as he deftly releases trajectory with the economy.
For the crypto markets, the “higher-for-longer” rate environment means challenges or opportunities. Leading stablecoin issuers such as Circle and Tether are reportedly adjusting their treasury strategy to maximize returns on reserve assets, while traders closely monitor the relative performance of crypto versus traditional markets. At the time, Powell acknowledged, “We’re in a foggy period.” This may be a moment that solidifies crypto’s position as an inflation hedge or a moment that may test its ability to absorb stagflationary pressures.
Summing Up
Let’s be honest – this was the most predictable “hold” since HODL memes. The Fed’s stuck between a tariff rock and a recession hard place, and crypto markets know it. For those degens who lived through 2022’s hikes, take this stalemate over panic cuts any day. But grab some popcorn: when Trump’s tariffs hit consumer wallets this summer, even Bitcoin might feel the heat.
Question for you: Should the Federal Reserve (FED) prioritize killing inflation or propping up growth?
