Fed Keeps Interest Rates Steady in May Meeting: Cryptocurrency Market Almost Unresponsive

The Federal Open Market Committee (FOMC) of the Federal Reserve America (Fed) has concluded a two-day meeting with a decision to hold the basic interest rate at a range of 4.25% to 4.5%. This decision is entirely in line with market expectations, as per the CME FedWatch tool, the likelihood of the Fed holding the interest rate has been priced in at 99%. The Fed’s announcement indicates that they remain cautious in the context of inflation continuing to be “somewhat high” and the economic outlook becoming increasingly uncertain. The Fed stated that although the American economy is still growing steadily with strong employment data and low unemployment rates, the risks associated with inflation and unemployment are on the rise. Notably, the Fed also mentioned the potential impacts of the new tariffs proposed by former President Donald Trump, which could increase inflationary pressures in the near future. While Trump has repeatedly called for interest rate cuts to support economic growth, recent strong employment data has made the likelihood of a rate cut in June less feasible. According to the Fed’s assessment, they will continue to closely monitor economic data and adjust interest rate policies accordingly to maintain their dual mandate: to stabilize inflation around 2% and support the labor market. Before this announcement, the financial market – especially the cryptocurrency market – showed almost no significant reaction. The price of Bitcoin only decreased slightly by 0.2% within an hour after the announcement, indicating that the decision to stay tuned on interest rates was in line with the expectations of most investors. Regarding the outlook for monetary policy in the near future, many investors currently expect that the Fed may start cutting interest rates in July, and continue with two to three more cuts before the end of 2025. However, this will still depend on upcoming economic data, especially the trends in inflation and the labor market.