Fed Holds Rates Steady, Signals Caution on Easing

Federal Reserve Holds Interest Rates Steady, Signals Caution on Policy Adjustment

The Federal Reserve has announced its first monetary policy decision of 2025, keeping interest rates steady at the 4.25% to 4.5% range. This decision aligns with market expectations and reflects the Fed's cautious approach to policy easing. The Fed has signaled that it will proceed more cautiously with any rate cuts, waiting for more progress in lowering inflation before taking further action.

Fed Chair Jerome Powell reiterated that the committee is not rushing to lower the key benchmark interest rates and will proceed more cautiously with any rate cuts. The Fed's decision to drop the long-standing reference to inflation "progress" in its post-meeting statement suggests that policymakers want to see further anti-inflation progress before cutting rates again later this year.

Short-term interest rate futures pricing indicates a higher likelihood that the Fed will not cut rates before June. Traders now estimate the probability of a rate cut before June to be around 40%, down from the previous estimate of close to 50%. Interest rate futures contracts continue to suggest that June is the most likely month for a rate cut, with a higher probability of a second 25 basis point rate cut before the end of the year.

Federal Reserve officials have stated that they basically believe that progress in lowering inflation will resume this year, but they have now paused the rate cuts and are waiting for data confirmation. Officials want to see if inflation continues to decline to the Fed's target level in the coming months before easing monetary policy again, while also expressing uncertainty about the impact of Trump's plans on price pressures, the labor market, and economic growth.

Investors are focusing on Fed interest rate expectations for March 19, 2025, with a 71.6% likelihood of steady (4.25 – 4.50) and a 28.2% likelihood of a 25 BPS cut. The Fed's decision to keep interest rates unchanged could be bearish for risky assets like cryptocurrencies, as it signals a more cautious approach to policy easing.

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