The U.S. Federal Reserve announced after the FOMC meeting on March 20 that it would maintain the benchmark interest rate in the range of 4.25%-4.5%, in line with market expectations. The latest interest rate dot plot shows that most officials predict that there will be two interest rate cuts in 2025 (a total of 50 basis points), but there is a divergence of opinion among the 19 voting members, with nine supporting two interest rate cuts, four advocating no interest rate cuts, and four predicting one interest rate cut, reflecting a decrease in internal consensus.
Risk assets rose together, Bitcoin and gold rose simultaneously
After the policy was announced, the three major U.S. stock indexes closed up 0.92%-1.4%, with Nvidia and Tesla leading the gains in technology stocks. The 2-year Treasury yield fell below 4%, and the 10-year yield fell to 4.24%. $BTC Bitcoin broke through $87,000 and is currently falling back to $85,849.
Bitcoin breaks through $87,000
The spot price of gold simultaneously surged to $3,056 per ounce, up 16% this year, reflecting the market's dual bets on easing expectations and safe-haven demand.
Gold spot price
The balance sheet reduction slowdown started in April, with the scale of government bond redemption cut by 80%
The Federal Reserve also announced that it would slow the pace of quantitative tightening (QT) starting in April, significantly reducing the monthly redemption limit for U.S. Treasury bonds from US$25 billion to US$5 billion, while maintaining the limit for agency bonds and mortgage-backed securities at US$35 billion. This is the first adjustment since the launch of the balance sheet reduction in June 2022. Powell said the move is aimed at extending the QT execution time and stabilizing market liquidity. Data showed the Federal Reserve's balance sheet had shrunk by nearly $2 trillion.
The Federal Reserve updated its economic outlook, revising down the 2025 GDP growth rate from 2.1% to 1.7% and raising the core PCE inflation rate from 2.5% to 2.7%. The unemployment rate is forecast to rise slightly to 4.4%, and the long-term GDP growth rate after 2026 is revised down to 1.8%. Powell noted that sticky inflation is a hedge against economic slowdown, but stressed that "the probability of a severe recession remains low."
Trump's tariff policy hits Powell, who first raises concerns about stagflation
Regarding the Trump administration's tariff increase measures, Powell admitted that the move would push up inflation expectations and may suppress exports and economic growth, exacerbating the risk of "stagflation." He stressed that the Fed will distinguish between "tariff inflation" and endogenous inflation in order to accurately assess the effectiveness of policies.
