Federal Reserve Holds Rates Steady Amid Growing Stagflation Concerns

The Federal Reserve maintained interest rates unchanged, aligning with market expectations. Policymakers remain divided on the path forward, with seven of 19 officials now opposing any rate cuts in 2025—up from four in March. Despite internal disagreements, the committee unanimously approved a policy statement projecting two potential cuts by year-end 2025.

Economic forecasts took a darker turn, with GDP growth estimates for 2024 slashed to 1.4% from 1.7%. Simultaneously, inflation projections rose sharply—both PCE and Core PCE were revised upward by 0.3 percentage points to 3% and 3.1% respectively. The unemployment rate is now expected to climb to 4.5%, painting a concerning picture of stagflation.

Market participants will scrutinize these developments for implications on risk assets. Cryptocurrencies traditionally exhibit heightened volatility during periods of monetary policy uncertainty and economic stagnation. The Fed's revised DOT plot, showing fewer projected cuts through 2027, may pressure liquidity-sensitive assets while potentially boosting Bitcoin's appeal as an inflation hedge.