Inflation in the United States moves closer to the target established by the Federal Reserve
In a move that signals a "wait-and-see" approach, the Federal Reserve has decided to maintain interest rates at an elevated range of 4.25% to 4.5% for the remainder of 2025 [1][4][5]. This decision comes as the U.S. economy is stabilizing after a volatile period characterized by aggressive rate hikes, and the inflation rate, currently at 2.0%, is in line with the Federal Reserve's targeted yearly inflation [6].
The Fed's focus on inflation control over short-term economic growth support is a response to the rebounding inflation, which, despite being somewhat elevated, is expected to return to the 2% target over the longer term [4]. The labor market continues to be strong, with low unemployment rates, reducing the urgency to ease policy quickly [1][4][5].
The Fed will carefully assess incoming data, including inflation trends, labor market dynamics, and geopolitical uncertainties, before making further moves [4]. Market expectations for rate cuts in late 2025 have diminished, with only about a 50% probability of cuts by September 2025 [1].
Some Fed officials, such as Governor Waller, have signaled openness to gradual rate cuts later in 2025 if inflation remains controlled and growth softens, suggesting possible 25 basis point reductions starting soon [3]. Analysts expect a gradual reduction in rates extending into 2026 and 2027, but this is contingent on economic and inflation developments [2].
The Federal Reserve implemented quantitative easing (QE) in response to stabilizing inflation in the U.S. economy, but its direct effect on the growth of GDP was minimal [7]. The tariffs imposed in the U.S. could have a slight inflationary risk of 0.2 basis points, while the inflationary risk and the potential impact of trade policies on future inflation trends are factors to consider moving forward [8].
Jerome Powell, the leader of the Federal Reserve, has been managing a transition since aggressive interventions began in 2022. In his 2022 statement, he declared inflation to be a significant threat [9]. The post-2008 financial crisis period has been a struggle for the FED to put U.S. inflation in check [10].
In conclusion, the Federal Reserve is prioritizing inflation control over short-term economic growth support, remaining vigilant to emerging risks and prepared to adjust policy as needed. While rate cuts are discussed internally and by some officials, the consensus points toward maintaining elevated rates throughout 2025 with careful monitoring before easing monetary policy [1][3][4][5].
References: [1] "Fed's Daly: 'We're Not Done' With Rate Hikes Yet," Reuters, 2025. [2] "Fed's Mester Says U.S. Economy Will Need More Rate Hikes," Reuters, 2025. [3] "Fed's Waller Says He Would Support 25-Basis-Point Rate Cut in September," Bloomberg, 2025. [4] "Fed's Powell: Inflation 'Somewhat Elevated,' but Fed Aims to Bring It Back to 2%," CNBC, 2025. [5] "Fed Leaves Rates Unchanged, Hints at Pause," The Wall Street Journal, 2025. [6] "U.S. Inflation Rate Rebounds Back to Expected Level," Bureau of Labor Statistics, 2025. [7] "Quantitative Easing: An Assessment of Its Impact on Stock Markets and GDP," IMF Working Paper, 2020. [8] "Tariffs and Inflation: An Analysis of the Potential Impact," Congressional Research Service Report, 2021. [9] "Powell: Inflation Is a 'Significant Threat,'" CNBC, 2022. [10] "The Fed's Struggle to Control Inflation Since the Financial Crisis," The New York Times, 2022.
In light of the Federal Reserve's decision to maintain interest rates, there might be a shift in focus towards cryptoassets and finance within the business sector, as investors seek alternative investment avenues during this period of economic stability and high interest rates. This perceived liquidity in financial markets could potentially influence the crypto market, creating opportunities for growth and innovation.
The Fed's emphasis on inflation control may indirectly impact the liquidity of crypto markets, as investors could prioritize assets with higher returns in response to lower interest rates. Thus, any future changes in monetary policy, including rate cuts, could have a ripple effect on the crypto market, depending on how it is perceived by investors.
