The central bank has opted to maintain its benchmark interest rate for the second consecutive meeting, reflecting concerns regarding a slowdown in economic growth combined with ongoing inflation pressures. While there was no increase in borrowing costs, adjustments to the balance sheet policy were made, which reportedly led to some internal disagreements.
In the aftermath of this announcement, the cryptocurrency market reacted positively, with significant gains observed in the prices of major digital currencies. As of the recent update, Bitcoin saw a rise of 4%, reaching a value of $84,000. Ethereum experienced an 8% increase, trading at approximately $2,034, while XRP led the upward movement with a notable 10% boost to $2.47.
The central bank maintained the federal funds rate range at 4.25% to 4.50% while revising growth expectations downward. The outlook for inflation was also adjusted upwards, indicating a cautious stance from the policymakers. An official statement emphasized the dual goals of achieving maximum employment along with long-term inflation at 2%. It also acknowledged growing uncertainty regarding the economic outlook.
Significantly, plans to decelerate the pace of balance sheet runoff starting in April were also announced, further complicating the monetary policy landscape. Current economic projections indicate that GDP growth for 2025 is estimated at just 1.7%, down from the previous forecast of 2.1% made in December. Similar downward adjustments were made for growth estimates extending into 2026 and 2027, which underscores the ongoing uncertainty concerning future economic conditions.
Despite these challenges, projections indicate a potential year-end benchmark interest rate of 3.9% for 2025, suggesting the possibility of only two cuts in rates during the year. The anticipated rates for 2026 and 2027 are forecasted at 3.4% and 3.1%, respectively, signaling that high borrowing costs may persist in the near future.
Earlier in December, forecasts suggested an inflation rate of 2.5% for 2025 alongside a GDP growth estimate of 2.1%. Given recent data, it’s likely that inflation expectations will be revised upward, while growth projections may be adjusted downward.
With this pronounced uncertainty surrounding economic growth, inflation rates, and prospective changes to interest rates, the upcoming meetings will significantly influence investor sentiment. For cryptocurrency traders, despite temporary fluctuations in the market, the broader landscape of digital assets appears to be holding steady as they navigate these developments.