Fed's Hawkish Stance Halts Rate Cuts, Inflation Fears Surge

Federal Reserve's Hawkish Stance Stalls Anticipated Rate Cuts, Ignites Fresh Inflation Worries

The Federal Reserve has maintained its hawkish stance, keeping interest rates unchanged and signaling caution on future cuts, which has stalled anticipated rate cuts and reignited concerns about persistent inflation.

In its latest policy statement, the Fed removed language acknowledging progress on inflation, indicating that it wants to see more evidence of declining prices before easing monetary policy. This shift in tone has led markets to price in less than a 40% probability of additional rate cuts in 2025.

Fed Chair Jerome Powell emphasized that the central bank is in a wait-and-see phase, comfortable with its current interest rate stance, and will proceed cautiously with any rate cuts. Officials want to see if inflation continues to decline to the Fed's target level in the coming months before easing monetary policy again.

The Fed's pause in rate cuts comes as a surprise to some, as many had expected a 25-basis-point cut in June, based on short-term interest rate futures. However, traders now expect the Fed to delay the rate cut until June, as indicated by short-term interest rate futures.

A Federal Reserve official believes that confirmation of an anti-inflation situation is needed before considering policy easing again. Officials want to see if inflation continues to decline to the Fed's target level in the coming months before easing monetary policy.

The Fed's decision to hold rates steady and remove language acknowledging progress on inflation has led to a decline in Bitcoin's price, which dipped below $100,000 after the news. However, the digital asset has since recovered and is currently trading just below $102,000.

Market expectations for monetary easing remain active, with the CME FedWatch tool indicating a 46.5% probability of a 25-basis-point rate cut in June and a 43.5% chance in July. However, these expectations are now lower than previously anticipated, suggesting that the Fed may not cut rates as aggressively as initially expected.

Analysts believe that the Fed's pause in rate cuts is a positive development for the crypto market, as it reduces the risk of a policy mistake that could lead to a sharp sell-off in risk assets. Additionally, the Fed's focus on fighting inflation may lead to