The Federal Reserve is about to announce its rate decision, and almost no one expects it to cut them.
However, traders will be paying close attention to Chairman Jerome Powell’s post-meeting press conference, which may contain the real intrigue.
His views on what to expect in the coming months and recent hot topics, including President Donald Trump’s affordability policy and threats to the Fed’s independence, could shake up both traditional and crypto markets.
Let’s take a look at what’s being priced and how Powell’s comments could move markets.
Status quo on prices
After making three consecutive quarter-point cuts, the central bank is expected to remain unchanged on Wednesday. As of Friday, CME’s FedWatch futures priced a 96% probability that the Fed would hold between 3.5% and 3.75%.
That’s consistent with Powell’s message in December that the bank’s voting committee would delay any further cuts until 2026. Additionally, Minneapolis Fed President Neel Kashkari, who will vote on the Federal Open Market Committee this year, recently told the New York Times that he thought it was “way too early” to cut rates again.
So unless the Fed decides on an unexpected rate cut, which could send the dollar tumbling while boosting bitcoin and stocks, the decision itself is shaping up to be a non-event.
Warmongering or accommodating pause?
However, the main question for traders will be whether the impending pause in rate cuts signals a hawkish or dovish stance.
A hawkish pause scenario involves Powell signaling lingering inflation risks, shaking up bets on a rate cut and putting downward pressure on risk assets. A dovish scenario would mean Wednesday’s pause would be temporary and rate cuts would resume in the coming months, which could send bitcoin higher.
Morgan Stanley expects the Fed to send a dovish signal by retaining the policy statement’s wording “taking into account the range and timing of further adjustments to the target range,” signaling that easing remains on the table. The statement is expected to recognize the robustness of the economy while preserving options for future rate cuts.
Watch for opponents of the Fed rate pause, as they could amplify a dovish trend. Trump appointee Stephen Miran is expected to disagree with a bold 50 basis point cut. If the number of dissenters increases, it would strengthen the case for future easing, boosting stocks and bitcoin.
For now, most observers except JPMorgan expect the Fed to cut rates once or twice over the rest of the year. JPMorgan expects no rate movement this year, followed by a rise next year.
Status quo and financial accessibility measures
Powell will likely face questions about the rationale for keeping rates steady, as well as the potential impact of Trump’s affordability measures and related questions on key macroeconomic variables.
According to ING, Powell’s explanation of the status quo rate decision could send the U.S. dollar higher, potentially weakening greenback-dominated assets like bitcoin.
“Given the recent performance of asset markets and US activity, he will be hard-pressed to argue that financial conditions are restrictive and need to be eased. This could cast a chill on the idea of a second Fed rate cut and push the dollar higher against low-yielding countries like the yen and euro,” ING analysts said.
“Instead, the dollar’s next macroeconomic decline will likely have to result from poor data rather than Fed rhetoric,” they added.
Powell’s potential nod to Trump’s housing affordability efforts as inherently inflationary in the short term could amplify market volatility.
Trump recently said he had directed his representatives to buy $200 billion in mortgage bonds, saying it would lower rates and lower monthly payments. He also issued an executive order requiring large institutional investors to refrain from purchasing single-family homes that families might otherwise purchase.
Observers say the measures could boost demand, spurring housing inflation.
“Procurement [of] $200 billion in mortgage-backed securities risks driving up demand, inflating prices and diverting profits to incumbents. On the other hand, the impact of prohibiting large institutional investors from purchasing single-family homes will likely be limited, given the low number of institutional owners relative to the overall stock,” Allianz Investment Management said in a note.
It is worth noting that Trump’s tariffs are already priced in and a delayed inflationary impact is expected this year as higher import costs are passed on to the end consumer.
Finally, Powell could face questions about the DOJ investigation targeting him personally, which he calls political revenge for not cutting rates quickly enough to suit Trump, and recent bond market volatility stemming from Japan’s budget problems. He could dodge the investigation while downplaying bond market fears.
