As anticipated, the U.S. Federal Reserve maintained its benchmark fed funds rate range at 4.25%-4.50% on Wednesday, marking the second consecutive hold following three rate cuts to close out 2024.
The Fed’s quarterly economic projections revealed a considerable drop in the outlook for economic expansion, with the GDP growth forecast for 2025 revised down to 1.7% from December’s estimate of 2.1%. Projections for 2026 and 2027 were also lowered.
“Uncertainty regarding the economic outlook has increased,” the Fed noted in a statement, likely referring to the turmoil surrounding the threatened tariff policies from President Trump.
Alongside this easing growth, core PCE inflation is now anticipated to reach 2.8% this year, up from the previous projection of 2.5%. The core inflation expectations for 2026 and 2027 remain at 2.2% and 2.0%, respectively.
The “dot plot,” which illustrates the FOMC members’ forecasts for future interest rate movements, suggests that the fed funds rate will finish this year at 3.9%, aligning with December’s prediction. The anticipated fed funds rates for 2026 and 2027 continue to stand at 3.4% and 3.1%, respectively.
The Fed also announced plans to reduce the pace of its securities runoff, known as quantitative tightening, starting on April 1. The decrease in Treasury holdings will be scaled back to $5 billion from the prior $25 billion.
Bitcoin (BTC) experienced volatility right after the announcement but dropped at the time of reporting to $83,500, down from just above $84,000 before the news broke.
U.S. equities are maintaining strong gains, and the yield on the 10-year Treasury has decreased by two basis points to 4.28%. Gold, meanwhile, continues to shine among asset classes, hovering near record highs at $3,048 per ounce.
Risk assets have faced pressure recently, driven by growing fears regarding President Trump’s tariff threats and their potential effects on inflation and economic growth, which have dampened investor confidence. Additionally, the Fed’s hawkish stance during the December and January meetings has hindered expectations for looser financial conditions in the near future, creating challenges for both cryptocurrencies and stocks.
Fed Chair Jerome Powell is set to speak at 2:30 p.m. Eastern Time (18:30 UTC), with traders keenly awaiting the press conference for further insights into the policymakers’ perspectives on monetary policy.