The U.S. Federal Reserve kept its benchmark rates unchanged at 3.5 percent to 3.75 percent on Wednesday, for a fourth consecutive meeting as it weighs persistent inflation against slowing growth.
The decision, in tandem with market expectations, comes on the back of a solid job market and geopolitical unrest in the Middle East that is contributing to a high level of uncertainty in the economic outlook.
Interestingly, the decision likely marks chair Jerome Powell’s last ruling with his retirement set for May 15, 2026. The topmost position at the Fed is up for grabs with Trump’s nominee Kevin Warsh moving to a confirmation vote of the upper chamber. At present, the Senate Banking Committee voted 13-11 to approve the nomination on a party-line vote, with Republicans supporting the nomination and Democrats opposing it.
Soon after the decision, Bitcoin slipped to $75,200 from $76,000. Other altcoins also followed suit, facing a bloodbath. Ether, XRP, and Solana traded 1.9, 1.04, and 1.4 percent down, respectively.
On the other hand, DXY strengthened by 0.3 percent, rising from 98.57 to around 98.91 as of afternoon trading.
Despite the rate decision landing as per market expectations, financial benchmarks faced a rather harsh drop amid the Fed still keeping a hawkish outlook while upholding the 2 percent inflation mark.
Looking further, Jerome Powell is expected to use the post-meeting press conference to give clearer guidance on how ongoing inflation risks could influence the timing of potential interest rate cuts, or even hikes, later this year.
Fed continues inflation benchmark
The Fed’s continuation of the 2 percent inflation level has time and again put pressure on financial markets, especially risk assets like stocks and crypto.
Bitcoin price has always stayed sensitive to macro economic factors, with the Fed’s rate decision, which depends on the inflation outlook, playing an important role. Generally, a rate cut makes government backed assets less alluring due to a low interest payout, thereby raising market value for riskier assets like Bitcoin.
While talking to The Coin Headlines, Bitunix analysts say that the Federal Reserve shows near-unanimous support for holding rates steady, even among traditionally dovish members, reflecting persistent inflation concerns and reinforcing a cautious forward policy bias.
“Markets are now increasingly sensitive to forward guidance rather than immediate policy action, “ says Dean Chen from Bitunix.
They add, “In aggregate, macro uncertainty, driven by central bank path divergence and ongoing energy price transmission, has yet to produce a clear directional signal. As a result, capital is favoring short-term liquidity extraction over trend conviction. BTC, in this phase, is no longer primarily reflecting safe-haven demand, but instead operating as a function of liquidity conditions and leverage structure, with price action dominated by tactical positioning rather than structural flows.”
Next Fed chair
The benchmark rate decision has landed on the same day as Trump’s new nomination Kevin Warsh has cleared an important vote. Warsh’s nomination as a possible successor to Jerome Powell has advanced through the U.S. Senate Banking Committee on Wednesday with a majority vote.
As expected, voting was along party lines, illustrating the partisan divide in terms of monetary policy and what lies ahead for the Federal Reserve.
Nevertheless, the move paves the way for the Trump Administration’s candidate to undergo a final vote in the Senate, where he enjoys strong odds of success due to the majority held by Republicans.
In terms of financial markets, the development is noteworthy since the role of Federal Reserve Chair has considerable sway over monetary policies, including interest rates and inflation targets.
While Warsh tends to prioritize measures aimed at curbing inflation, he has been described as highly attuned to market movements, signaling that there might be some shift in strategy when compared to the outgoing chair’s approach.
Impact on the crypto market
A change in the leadership at the Federal Reserve may well affect liquidity expectations, one of the fundamental aspects driving the movements in cryptocurrency valuations.
The prospect that the incoming chair may eventually push the case for more accommodative monetary policy, including an earlier interest rate cut, can typically be perceived positively by risk asset investors like Bitcoin.
On the other hand, tighter monetary policy expectations may adversely impact cryptocurrencies because it will limit capital inflows while increasing risk aversion.
Thus, although the confirmation of Warsh will not have any regulatory implications for digital currencies per se, it may well impact the underlying macroeconomic environment in which they need to operate.
