Key Insights:
- While crypto news showed positive, Fed kept rates at 4.25%-4.5% on May 7, 2025, due to tariff inflation risks.
- Trump’s tariffs could drive inflation, impacting Fed policy.
- March CPI dropped 0.1%, with annual inflation at 2.4%.
- Rate cuts are now expected in July 2025, with 2-3 by year-end.
The crypto market thrives on volatility, but the Federal Reserve is playing it cool. On May 7, 2025, the Fed held interest rates steady at 4.25% to 4.5%, shrugging off President Donald Trump’s desperate calls for cuts.
The Fed’s pause—its third since January—signals caution amid Trump’s tariff-driven inflation risks. Inflation sits at 2.4%, and trade policies threaten to push it higher. Is the Fed bracing for a storm, and what does it mean for crypto market and news?
Federal Reserve Holds Rates Steady
The Federal Open Market Committee (FOMC) kept rates unchanged for the third straight meeting on May 7, 2025. The decision met market expectations, with a 98% probability priced in, according to CME FedWatch.
Policymakers cited the “record imports” in Q1, driven by firms stocking up ahead of new Trump tariffs, as a key factor clouding the outlook. The Fed’s statement highlighted elevated uncertainty around trade-policy impacts on inflation.
The Fed noted solid economic growth and a strong labor market but flagged “somewhat elevated” inflation at 2.4% annually, down from 2.8% in February, according to the U.S. Bureau of Labor Statistics.
Uncertainty has “increased further,” driven by Trump’s tariffs, raising risks of higher unemployment and inflation.
Trump’s tariffs, rolled out since April, target steel, aluminum, and autos, with a 25% duty on imports. The Tax Foundation estimates these will boost federal revenues by $163.1 Billion in 2025, or 0.54% of GDP, but cut GDP by 8% and wages by 7%.
U.S. job growth slowed modestly in April, with 177,000 new positions added—below the 228,000 gains in March. Yet the unemployment rate held at 4.2%, matching the forecast. April’s nonfarm payrolls underscored ongoing labor-market resilience despite tariff-fueled uncertainty.
A middle-income household could face a $1,200 annual cost increase. Fed Chair Jerome Powell, on March 19, 2025, said tariffs are “a good part” of rising inflation, delaying progress toward the 2% target.
Trump’s Pressure, Fed’s Resolve: Will Crypto News Narrative Improve?
Trump has pushed for rate cuts, claiming no inflation exists. “NO INFLATION, THE FED SHOULD LOWER ITS RATE!!!” He posted on Truth Social on May 2, 2025.
Yet, April’s strong job gains and 2.4% inflation bolstered the Fed’s pause. The FOMC emphasized data-driven decisions, noting risks to its dual mandate of price stability and maximum employment. Powell stressed the Fed’s independence, saying monetary policy remains separate from politics.
Markets expected the pause but adjusted rate-cut forecasts. Investors now see cuts starting in July 2025, with two to three reductions by year-end.
The Fed’s projections align, anticipating two cuts in 2025 and two in 2026, with core PCE inflation at 2.8% this year.
Trump’s tariff uncertainties, including retaliatory moves from China and the EU affecting $330 billion in U.S. exports, add complexity.
The dollar weakened slightly post-announcement amid “strategic uncertainty” over trade policy. Crypto markets, with Bitcoin above $97,000 and ETF assets at 1.171 million BTC, are sensitive to Fed moves. The $4.6 Billion ETF inflow in over the last two weeks reflects risk-on sentiment.
But tariffs could raise costs, impacting crypto’s safe-haven appeal. The Fed’s pause suggests stability, but stagflation risks loom. Investors must watch trade talks and inflation data to gauge Bitcoin’s path.
The Fed’s rate hold defies Trump’s pressure, prioritizing inflation control over political demands. With tariffs threatening economic growth and price stability, the Fed’s data-driven approach signals vigilance.
Crypto investors, riding Bitcoin’s rally, face a market shaped by these tensions. The next FOMC meeting in July will be pivotal.
