Role of the Federal Open Market Committee
The Federal Open Market Committee is responsible for determining the interest rate on the central bank's open market operations with the aim of achieving price stability and maximizing employment opportunities, known as the Federal Reserve's dual mandate.
Current economic context
The first quarter of 2025 saw a contraction in GDP of 0.3% compared to the previous quarter, while annual inflation according to the personal consumption expenditures index remained around 2.6%, with the labor market adding 177,000 jobs in April, reducing the chances of an immediate interest rate cut.
Core FOMC decisions
Stability of interest rates
The committee decided to keep the target interest rate unchanged in the range of 4.25%–4.50% for the third consecutive time since December 2024, in a move consistent with financial market expectations.
"Wait and see" statement
The official statement emphasized the importance of monitoring the impact of rising tariffs on supply chains and inflation before taking any future steps, indicating that the future depends on developments in economic data.
Future trajectory forecasts
Federal officials' forecasts indicated a possibility of interest rate cuts between July and December 2025, while keeping the door open for further guidance during Jerome Powell's subsequent press conference.
Impact of the decision on traditional markets
Movements in stocks and bonds
Futures contracts for Wall Street indices fell by about 1% ahead of the announcement, amid a state of anticipation and caution among investors, while Treasury bonds maintained relatively stable yields.
Dollar and safe havens
The dollar weakened against major currencies due to investors' concerns about trade policy and the reliability of safe havens, which drove gold to rise by over 2% to record levels, while the dollar fell by 0.1% according to the dollar index.
Impact analysis on digital currencies
Liquidity and risk assessment
Maintaining the interest rate at the current level means that borrowing costs remain relatively high, reducing the flow of new liquidity to high-risk assets, including digital currencies in the near term.
Bitcoin price movements
Bitcoin recorded a slight decline of 0.1% near $94,200 ahead of the meeting, awaiting Powell's hints during the press conference to determine a new bullish or bearish price trajectory.
Digital market forecasts
If Powell indicates monetary easing or liquidity support in the coming months, Bitcoin and digital currency funds may experience increases similar to those recorded in late 2024 after the interest rate cut.