NAIROBI (CoinChapter.com)— United States Federal Reserve officials are taking a cautious, neutral stance on monetary policy as they await clarity on the potential economic impacts of incoming President Donald Trump’s policies. With inflation remaining above the Fed’s 2% target and recent rate cuts already recalibrating policy, officials appear hesitant to commit to further easing.
Fed Keeps Rates Steady as Trump Era Looms
Federal Reserve Governor Michelle W. Bowman hinted that the upcoming months could offer clarity on the economic impact of Trump’s policies.
Speaking on Jan. 9 in California, Bowman underscored the importance of a cautious approach, warning against actions that could unnecessarily fuel demand and reignite inflation.
KC Fed CEO Supports Gradual Rate Adjustments. Source: Kansas City FedEchoing this sentiment, Kansas City Federal Reserve President Jeff Schmid highlighted that the U.S. economy is nearing a point where neither restrictions nor additional support are necessary. “Policy should remain neutral,” Schmid said, as he emphasized the fine balance between maintaining growth and combating inflationary pressures.
The Federal Open Market Committee’s (FOMC) recent minutes further illuminated this balanced approach. Officials expressed uncertainty over additional rate cuts, acknowledging persistent inflation and its potential to delay their target of 2%.
Bitcoin Dips as Fed Maintains Neutral Stance
The Fed’s cautious approach has rippled into financial and cryptocurrency markets. Investors have priced in a 95% chance that rates will hold steady at the Fed’s Jan. 29 meeting. However, mixed economic data and uncertainty over future policies have introduced market volatility.
Target interest rate probabilities. Jan. 29. Source: CME GroupRyan Lee, chief analyst at Bitget Research, attributed Bitcoin’s drop on Jan. 8 to $92,500 to strong U.S. economic data and the Fed’s signals of tighter policy.
“Cryptocurrencies become less appealing when monetary policy tightens, reducing risk appetite,” Lee said.
The Fed’s December rate cut of 0.25% marked the final step in what Bowman called the “policy recalibration phase.” However, Federal Reserve Chair Jerome Powell indicated only two more cuts in 2025, tempering market expectations for additional easing.
Fed Stresses Patience Amid Uncertainty
Philadelphia Federal Reserve President Patrick Harker stressed the importance of pausing to evaluate economic conditions. “It’s appropriate for us to wait and see how things evolve,” Harker said, reflecting the cautious tone among Fed officials.
As Trump takes office, the Federal Reserve faces a delicate task—balancing inflation control with sustained economic growth.
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