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Cryptocurrency markets experienced positive movement on Thursday, with Bitcoin and Ethereum leading the way, despite the U.S. Federal Reserve signaling a cautious approach to future interest rate cuts following its FOMC meeting yesterday.
Bitcoin gained by 3.27% to reach $85,701 in the past 24 hours, while Ethereum climbed 4.52% to $2,020. The global cryptocurrency market capitalization also saw an increase of 3.20%, reaching $2.8 trillion, according to Coinmarketcap data.
The positive price action in the crypto market came after Fed Chair Jerome Powell addressed the media following the FOMC meeting on Wednesday. When asked about the possibility of a rate cut in May, Powell said the Fed is "not going to be in any hurry to move on rate cuts."
The FOMC did announce its decision to slow the pace of balance-sheet runoff, starting April 1st, Reuters reported. The Fed will reduce the monthly pace of quantitative tightening (QT) to $5 billion from the current $25 billion. However, Powell emphasized that "slowing QT shouldn't be seen as a policy move," suggesting it is more of a technical adjustment rather than a signal of a shift in the overall monetary policy stance.
Powell also addressed the potential impact of tariffs on inflation, acknowledging that it would be "difficult to assess" and that a "good part of marked-up inflation" is currently stemming from tariffs. While the Fed's base case is that this tariff-related inflation will be transitory, Powell admitted that this outlook remains uncertain and could potentially delay progress on bringing inflation down to the central bank's target. Despite these concerns, Powell noted that the Fed does not see much increase in long-term expected inflation.
Blockhead
The FOMC's median forecasts revealed some adjustments to the economic outlook. The projection for 2025 GDP growth was revised downwards to 1.7% from 2.1% in December, while the unemployment forecast for 2025 was raised slightly to 4.4% from 4.3%. Notably, the Fed raised its forecasts for PCE inflation in 2025 to 2.7% from 2.5% and for core PCE inflation to 2.8% from 2.5%.
Despite the cautious tone on near-term rate cuts and the upward revisions to inflation forecasts, the FOMC's median projection still indicates 50 basis points of rate cuts in 2025, bringing the benchmark rate down to 3.9%. However, the distribution of policymakers' expectations showed a slightly more hawkish tilt compared to December, with fewer policymakers anticipating three or more rate cuts this year.
The positive movement in the cryptocurrency market following a relatively cautious FOMC meeting could be attributed to several factors: the confirmation of 50 basis points of cuts later is a supportive factor for risk assets like cryptocurrencies. Additionally, the slowing of quantitative tightening could be seen as a less restrictive monetary environment moving forward compared to the previous pace of balance sheet reduction.
