Bitcoin reclaims $85k after Fed signals slowdown in quantitative tightening

Bitcoin (BTC) reclaimed the $85,000 threshold following the Federal Open Market Committee (FOMC) median forecast of 50 basis-point cuts in interest rates in 2025.

In addition to signaling potential rate cuts, the Federal Reserve announced plans to slow the pace of its balance sheet runoff, also known as quantitative tightening (QT), beginning April 1.

The monthly cap on Treasuries maturing without replacement will be reduced to $5 billion, down from the previous $25 billion limit. The announcement caused global markets across the board to surge, including crypto.

Bitcoin jumped from $84,235.71 to nearly $86,000 before settling at $85,363 as of press time, based on CryptoSlate data.

Despite Bitcoin’s nearly 2% price increase, not all major altcoins did not react as strongly. Ethereum (ETH) is priced at $2,039.11 after a 0.6% positive variation in the same period, and Cardano (ADA) secured a slight 0.5% growth.

Meanwhile, XRP and BNB showed virtually no price variation. However, Solana (SOL) crossed the $130 threshold and was trading at $133.55 as of press time.

Federal Reserve Chair Jerome Powell emphasized that the decision should not be interpreted as a broader policy shift but rather as a technical adjustment to ensure smooth market functioning.

Fed’s rate path

The updated projections reveal a more cautious stance among FOMC members regarding the pace and extent of rate cuts. The median forecast brings the interest rate to approximately 3.9% by year-end.

Nine policymakers anticipate two cuts in 2025, down from 10 in December, while eight now expect only one or no cuts, an increase from four in the previous forecast. 

Meanwhile, two members foresee three cuts, a drop from five in December, and none project more than three rate reductions.

Longer-term expectations remain largely unchanged. The median forecast for the federal funds rate at the end of 2026 is 3.4%, while the 2027 projection is 3.1%. The Fed’s longer-run estimate of the neutral interest rate remains steady at 3%.

Moreover, the Fed’s latest economic forecasts indicate slow economic growth. The median 2025 GDP projection was revised downward to 1.7% from 2.1% in December. 

The unemployment rate forecast for 2025 has increased slightly to 4.4% from 4.3%, signaling expectations of modest labor market softening.

The central bank also adjusted inflation projections upward, expecting the Personal Consumption Expenditures (PCE) inflation rate to reach 2.7% in 2025, up from the previous 2.5% estimate. Core PCE inflation, which excludes food and energy, is projected to rise to 2.8%, compared to the earlier forecast of 2.5%.

Impact of tariffs

During his post-meeting press conference, Powell addressed concerns over inflationary pressures, particularly the impact of tariffs. 

He noted that a significant portion of recent inflation upticks could be attributed to tariff-related factors but stated that their long-term impact remains uncertain. 

Powell also described tariff-driven inflation as “transitory” but acknowledged the difficulty of assessing its effects. He reiterated that the Fed monitors economic data for any signs of weakness but emphasized that policymakers are not hurrying to cut rates. 

With persistent inflationary pressures and slowing economic growth, the Fed’s latest projections indicate a more measured approach to monetary policy adjustments. 

The central bank’s willingness to slow quantitative tightening while maintaining a cautious stance on rate cuts reflects a balancing act between sustaining economic stability and controlling inflation.

Mentioned in this article