Bitcoin’s rally hit a roadblock as the U.S. Federal
Reserve opted to keep interest rates unchanged in its first policy decision of
2025. The widely anticipated move sent Bitcoin sliding by $1,000 almost
immediately after the announcement. With inflation still a concern and President Donald
Trump pushing for lower rates, investors are left wondering when or if the Fed
will shift its stance.
At the time of writing, the top three cryptocurrencies, Bitcoin, Ethereum, and XRP, had not changed much in the past day but remained down on the weekly chart. Bitcoin traded at $103k, representing a 0.86% and 1.29% decline in the past day
and week, respectively.
Additionally, Ethereum changed hands for $3,114 on
CoinMarketCap, representing a drop of 1.07% in the past day and 5% in the past
week. XRP has also dropped more than 5% in the weekly chart.
Fed Holds Rates Amid Inflation
The Federal Reserve decided to maintain its benchmark
interest rate at 4.25%-4.5%, citing inflation risks and economic uncertainty,
Reuters reported. The move was expected, as the central bank had previously
hinted at pausing rate cuts following a 25-basis-point reduction in late 2024.
However, the decision is likely to increase tensions
between the Fed and the Trump administration, which has been vocal about the
need for lower borrowing costs.
While last week’s Consumer Price Index data suggested
inflation was not as severe as anticipated, the Fed remained cautious.
Officials omitted previous language about “progress” on inflation,
signaling that concerns persist.
Fed Chair Jerome Powell and his team now face a
complex economic landscape shaped by Trump’s policy proposals, including
potential tariffs and deregulation efforts.
Chair Powell answers reporters’ questions at the FOMC press conference on January 29, 2025. https://t.co/siWde1Rh9D pic.twitter.com/NvVVU0cDxz
— Federal Reserve (@federalreserve) January 29, 2025
Trump’s Economic Policies Add Uncertainty
If the Fed remains hesitant to cut rates further,
riskier investments could face more pressure. President Trump’s return to the White House has brought new economic policy challenges.
His calls for aggressive tariffs, including a proposed
25% levy on imports from Mexico and Canada, could disrupt global trade and fuel
inflation. At the same time, his push for tax cuts and
deregulation aims to stimulate growth but could also complicate the Fed’s
ability to manage inflation.
The central bank previously modeled different tariff
scenarios in 2018 and concluded that aggressive trade policies could lead to
higher inflation, potentially justifying rate hikes rather than cuts.
This article was written by Jared Kirui at www.financemagnates.com.
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