On March 19, the Federal Reserve announced that it would begin to slow the pace of quantitative tightening (QT) starting April 1, reducing the monthly cap on maturing Treasury bonds that are not replaced from $25 billion to $5 billion.
As soon as the news broke, global markets surged, with Bitcoin's price jumping from around $84,000 to over $87,000, an increase of nearly 4%, currently maintaining above $86,000. However, other major cryptocurrencies also rose in response, with Ethereum (ETH) increasing by 5% during the same period.
Federal Reserve Chairman Powell emphasized that this adjustment should not be interpreted as a broader policy shift, but rather a technical adjustment aimed at ensuring smooth market operations. However, the market has clearly reacted strongly to this news, as evidenced by the rise in Bitcoin's price.
Federal Reserve interest rate path forecast
Meanwhile, the Federal Reserve also predicts that interest rates will be cut by 50 basis points in 2025. FOMC members have become more cautious about the pace and extent of rate cuts, with the latest median forecast showing that the interest rate will be around 3.9% by the end of the year. Nine policymakers expect two rate cuts in 2025, down from ten in December; while eight expect only one cut or none at all, up from the previous forecast of four. In the long term, the median forecast for the federal funds rate is 3.4% by the end of 2026 and 3.1% in 2027, with the Fed's long-term forecast for the neutral rate remaining stable at 3%.
In terms of economic forecasts, the median GDP prediction for 2025 has been lowered from 2.1% in December to 1.7%, and the unemployment rate forecast has slightly increased from 4.3% to 4.4%, indicating that the labor market is expected to soften moderately. Meanwhile, the inflation forecast has been raised, with the Personal Consumption Expenditures (PCE) inflation rate for 2025 expected to reach 2.7%, up from the previous forecast of 2.5%; the core PCE inflation rate, excluding food and energy, is expected to rise to 2.8%, compared to the prior forecast of 2.5%.
The impact of tariff policies on the economy
Powell mentioned in the post-meeting press conference that a significant part of the recent rise in inflation can be attributed to tariff-related factors, but the long-term effects remain uncertain. He described the inflation caused by tariffs as 'transitory,' but acknowledged that it is difficult to assess its impact. He reiterated that the Federal Reserve will closely monitor economic data for any signs of weakness, but decision-makers are not in a hurry to cut interest rates.
In the context of persistent inflationary pressures and slowing economic growth, the Federal Reserve's latest predictions indicate that adjustments to monetary policy will be more cautious. The central bank is willing to slow down quantitative tightening while maintaining a cautious stance on interest rate cuts, reflecting a balance between sustaining economic stability and controlling inflation.
Overall, the Federal Reserve's policy adjustments have a significant impact on the market, and the rise in Bitcoin's price reflects the market's reaction to these changes. However, the future trajectory of the market remains uncertain.
How much impact do you think these adjustments by the Federal Reserve will have on the cryptocurrency market? Can Bitcoin's current rally be sustained? Share your thoughts in the comments!