Fed decision in focus: Implications for bitcoin and the dollar

The Fed is widely expected to keep rates unchanged, but Chair Jerome Powell’s messaging could still sway bitcoin, the dollar, and broader risk markets.

The Federal Reserve will deliver its latest policy decision this week, with investors almost unanimously expecting no change to interest rates. Instead, attention will be squarely on Chair Jerome Powell’s press conference, where guidance on the outlook for policy—and comments on politically charged issues—could move markets.

Powell’s views on the path of rates, as well as his remarks on President Donald Trump’s affordability initiatives and renewed scrutiny of the Fed’s independence, are likely to influence both traditional assets and crypto.

Rates expected to hold

Following three consecutive quarter-point rate cuts, the Fed is expected to pause. CME FedWatch data showed a 96% probability that policymakers would keep rates in the 3.5%–3.75% range.

That expectation aligns with Powell’s December remarks that further cuts are unlikely before 2026. Minneapolis Fed President Neel Kashkari, a voting member of the Federal Open Market Committee (FOMC) this year, recently reinforced that stance, saying it is “way too soon” to resume easing.

Barring a surprise cut—which would likely pressure the dollar and lift bitcoin and equities—the rate decision itself is expected to have little immediate impact.

Hawkish or dovish pause?

What markets care about most is how Powell characterizes the pause.

A hawkish tone—highlighting persistent inflation risks—could push back rate-cut expectations and weigh on risk assets. A dovish tone, suggesting the pause is temporary and cuts could resume later this year, would likely support bitcoin and stocks.

Morgan Stanley expects the Fed to strike a dovish balance by keeping language that it is “considering the range and timing for further adjustments” to rates, signaling flexibility while acknowledging economic resilience.

Investors will also be watching for dissent among policymakers. Fed Governor Stephen Miran, a Trump appointee, is expected to dissent in favor of a larger 50-basis-point cut. Additional dissenters would strengthen the case for future easing and could lift risk assets.

Most major banks expect one or two cuts later this year. JPMorgan stands apart, forecasting no cuts in 2025 and a rate hike in 2026.

Dollar impact and policy politics

Powell is likely to face questions about why rates remain on hold and how Trump’s affordability policies could affect inflation and financial conditions.

According to ING, Powell may find it difficult to argue that financial conditions are restrictive given the strength of U.S. markets and economic data. Such messaging could support the dollar and weigh on dollar-denominated assets like bitcoin.

ING analysts say a sustained decline in the dollar is more likely to come from weaker economic data than from dovish Fed rhetoric.

Powell may also be pressed on Trump’s housing measures, including a plan to purchase $200 billion in mortgage-backed securities and restrictions on large institutional investors buying single-family homes. Economists warn these steps could pull demand forward and push housing inflation higher.

Allianz Investment Management noted that large-scale MBS purchases could inflate prices and disproportionately benefit existing homeowners, while limits on institutional buyers may have only a modest effect due to their relatively small market share.

Trump’s tariffs are largely viewed as priced in, though their inflationary impact is expected to build gradually as higher import costs filter through to consumers.

Other issues on the radar

Beyond rates, Powell could be asked about a Justice Department investigation targeting him personally—an inquiry he has characterized as politically motivated—as well as recent volatility in global bond markets tied to Japan’s fiscal challenges. He is expected to sidestep the investigation and downplay broader bond-market risks.

With the rate decision largely settled, markets are likely to parse Powell’s tone for clues about whether the next move in policy will favor the dollar—or assets like bitcoin that tend to benefit from easier financial conditions.