Crypto markets have been unsettled by the U.S. trade war, and more recently, the escalation of tensions in the Middle East.
Bitcoin was trading roughly flat in the hour after the U.S. central bank hewed to its recent policy of keeping interest rates unchanged until it sees convincing evidence that inflation is unlikely to tick up again.
The largest cryptocurrency by market value was changing hands at about $104,250, according to crypto data provider CoinGecko, although it was slightly up over the past 24 hours. BTC is more than 5% off its high, set less than a month ago amid a wider swoon in crypto markets.
Ethereum was also recently flat, while Solana climbed a few fractions of a percentage point in the hour after the Fed decision. With the exception of Ethereum, altcoins have struggled during the past 30 days.
Crypto and other risk-on markets had overwhelmingly expected the Federal Reserve’s decision with the widely watched CME FedWatch tool forecasting a more than 99% probability the bank would leave rates at their current 4.25% to 4.50% range.
The bank last trimmed the rate in December, four meetings ago. It is projecting just two rate cuts, consistent with its stance at March meeting when it last issued this projection.
“Uncertainty about the economic outlook has diminished but remains elevated,” the bank said in release, adding: “In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.”
The Fed’s caution comes despite a series of surprisingly encouraging inflation readings. Last week, the Consumer Price Index rose an unexpectedly small 0.1% compared to April, sending the annual rate to 2.4%, not far off the bank’s 2% target. And April’s Personal Consumer Expenditures climbed just 0.1%, buoying investors looking for a rate reduction.
But central bankers have been watchful of the impact cause by U.S. President Donald Trump’s global trade war and other macroeconomic uncertainties that could send prices higher while casting the economy into recession.
Trump has repeatedly pressured the bank to cut rates and insulted central bank Chair Jerome Powell. On Tuesday he called called Powell “stupid,” arguing that the U.S. central bank “probably won’t cut [interest rates] today,” despite “no inflation” from tariffs.
Interest rate cuts would likely bolster crypto markets by introducing additional liquidity. Bitcoin is among the most reactive assets to liquidity.
Last week’s eruption of long-simmering antagonisms between Iran and Israel and the increasing likelihood of U.S. involvement have further dampened hopes for a rate slashing in the near future.
Brent crude oil, a measure of energy markets, rose 4% on Tuesday to more than $75 per barrel, the first time it’s topped that mark since mid-February, according to Trading Economics data.
“Markets are fully pricing in a hold on Wednesday, with inflation easing gradually but wage growth and consumption still robust,” wrote Nigel Green, CEO of financial advisory giant deVere Group, adding: “Still, the Fed isn’t seeing the kind of clean, convincing disinflation trend it needs to justify an immediate cut. The data is pointing in the right direction — but we’re not there yet.”
