The Fed is set to hold rates steady, but Powell’s guidance could sway bitcoin, the dollar, and broader risk markets.

The Federal Reserve will announce its latest interest rate decision this week, with almost all investors expecting no change. The real market-moving element will likely come from Chair Jerome Powell’s press conference, where his tone and commentary could influence both traditional and crypto assets.

Powell’s remarks on the future path of monetary policy, economic conditions, and politically sensitive issues—such as President Donald Trump’s affordability measures and concerns over Fed independence—will be closely watched.

Rates expected to stay put

After three consecutive quarter-point cuts, the Fed is widely anticipated to pause. CME FedWatch futures show a 96% probability of the federal funds rate remaining in the 3.5%–3.75% range.

This aligns with Powell’s December guidance that the FOMC intends to avoid additional cuts until at least 2026. Minneapolis Fed President Neel Kashkari, a voting member this year, echoed this view, calling further easing “way too soon.”

Unless the Fed surprises with a rate cut—which would likely weaken the dollar and boost bitcoin and equities—the decision itself is expected to have minimal immediate impact.

Hawkish vs. dovish pause

Markets will be closely watching whether Powell’s messaging frames the pause as hawkish or dovish.

A hawkish pause, emphasizing persistent inflation risks, could dampen expectations for future rate cuts and weigh on risk assets. A dovish pause, suggesting cuts could resume in the coming months, would likely lift equities and bitcoin.

Morgan Stanley anticipates a dovish tilt, with the Fed retaining language that it is “considering the range and timing for further adjustments,” keeping options open while acknowledging the economy’s resilience.

Dissenting Fed voices will also be a key focus. Trump-appointed Governor Stephen Miran is expected to favor a larger 50-basis-point cut. Additional dissenters would reinforce the possibility of future easing, potentially boosting risk assets.

Most analysts forecast one or two rate cuts later this year, while JPMorgan expects no cuts in 2025 and a rate hike in 2026.

Dollar and policy implications

Powell will likely face questions on why rates remain steady and how Trump’s affordability measures could affect inflation.

ING analysts suggest Powell may struggle to argue that financial conditions are restrictive given strong market performance, potentially supporting the dollar and weighing on bitcoin. A meaningful drop in the dollar, they note, is more likely to come from weaker economic data than Fed commentary.

Trump’s housing initiatives—$200 billion in mortgage-backed securities purchases and restrictions on institutional buyers of single-family homes—could also drive volatility. Economists warn these measures may front-load demand and push housing inflation higher. Allianz Investment Management noted that MBS purchases could inflate prices, while limits on institutional buyers may have minimal impact due to their relatively small market share.

Trump’s tariffs are largely priced in, though their inflationary effects are expected to emerge gradually as import costs filter through to consumers.

Other risks on the radar

Powell may also face questions about a Justice Department investigation targeting him personally, which he has described as politically motivated, as well as recent bond market volatility linked to Japan’s fiscal issues. He is expected to downplay these concerns.

With interest rates widely expected to remain unchanged, markets will be parsing Powell’s words for clues about the Fed’s next move—and whether policy will favor the dollar or risk assets like bitcoin.