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The FED maintains the expectation of making at least one rate cut in 2026.
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According to Powell, the FED is doing what is necessary to «serve the American people.»
The president of the United States Federal Reserve (FED), Jerome Powell, warned this Wednesday, March 18, that the Central Bank will not reduce interest rates if the economy does not show clear signs of progress in the fight against inflation.
The statement came after the meeting of the Federal Open Market Committee (FOMC), which decided to keep the federal funds rate unchangedat 3.75% year-on-year.
Powell opened his press conference with a diagnosis that mixes solidity and caution. «The U.S. economy has been expanding at a solid pace,» he said, although he acknowledged that inflation «remains somewhat elevated» and job gains have remained moderate.
The official noted that current monetary policy stance is “appropriate to promote progress” toward the goals of the Fed’s dual mandate: maximum employment and 2% inflation.
The big obstacle continues to be goods inflation, driven by tariffs. Powell was blunt about it: “Between half and three-quarters of core inflation is actually tariffs.”
With core PCE inflation at 3.0%—one percentage point above the target—, The Fed president acknowledged that “in net terms, we are not making progress”. However, he is confident that progress will come as the effects of the tariffs wear out and pass through the system, something he estimated could take «8 to 11 months or a year.»
To this base scenario is now added a new factor of uncertainty: the conflict in the Middle East and its impact on oil prices. Powell warned that higher energy prices will “drive headline inflation” in the short term, but was cautious about their underlying consequences.
“It is too early to know the extent and duration of the potential effects on the economy,” he said, adding that while it is standard doctrine to ignore energy shocks, that decision “has always depended on inflation expectations remaining well anchored.” In a context of five years of inflation above the target, this condition cannot be taken for granted.
When asked about the SEP forecasts—the FOMC’s summary of economic projections—Powell admitted that uncertainty is so high that several participants considered this cycle to be one in which the exercise could well have been skipped: «If we were ever going to skip an SEP, this would be a good one because we just don’t know.»
Despite this, the median projection continues to contemplate interest rate cuts this year, although conditional on the real performance of the economy. The message was clear: «If we don’t see that progress, then you won’t see the rate cut.»
Regarding the labor market, Powell asked not to draw hasty conclusions from the negative data from February, which showed a loss of 92,000 jobs. «We have to take the January and February reports together,» he explained, pointing out that climatic factors and a strike explain about 80,000 jobs in the negative result.
The unemployment rate has remained at 4.4% since Septemberand the official stressed that «the labor market is clearly not a source of inflationary pressures.»
Powell closed with a message of institutional firmness. Asked if he would leave office if his successor is not confirmed by May 15, he responded that he would serve as president. for the time as required by law, and was emphatic: «I have no intention of leaving the board until the investigation is completely completed.»
The FED, he concluded, will continue to do its work «with objectivity, integrity and a deep commitment to serving the American people.»
Why are interest rates important to the price of bitcoin?
The bitcoin market closely follows every move of the Federal Reserve because interest rates determine the cost of borrowing money in the global economy.
As explained in Criptopedia (educational section of NoticiasVE) when interest rates are high, credit becomes more expensive: both companies and investors pay more for financing, which reduces the liquidity available to allocate to assets considered «risky» such as bitcoin.
When rates go down, on the other hand, borrowing is cheaper, liquidity increases and part of that money ends up flowing into assets such as cryptocurrencies in search of greater profitability.
That dynamic became especially visible between 2020 and 2021, when the Fed kept rates near zero in response to the pandemic: cheap credit flooded the markets and bitcoin reached all-time highs.
The cycle of aggressive interest rate hikes that began in 2022 made financing more expensive, dried up liquidity, and was accompanied by a sharp drop in the price of the digital asset.
Since then, traders and investors incorporated the FOMC decisions as a central variable in their models: Every FED meeting is also a market event for bitcoin.