Bitcoin Price Tags 2-Week Highs As Markets Bet Big on Trump Crypto News

Cryptocurrency

Summary:

Bitcoin (BTC) spiked to two-week highs on March 20 amid rumors that the US government was preparing a “major update” to its crypto policy. BTC/USD 4-hour chart. Source: Cointelegraph/TradingV

Bitcoin (BTC) spiked to two-week highs on March 20 amid rumors that the US government was preparing a “major update” to its crypto policy.

BTC/USD 4-hour chart. Source: Cointelegraph/TradingView

Fed’s Powell injects relief into stocks, crypto

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD reaching nearly $87,500 on Bitstamp.

Currently consolidating near $86,000, Bitcoin benefitted from a fairly cool Federal Reserve meeting the day prior in which officials opted to hold interest rates at current levels.

Policymakers confirmed that they envisage two cuts by the end of 2025, with Fed Chair Jerome Powell describing inflation as having “eased significantly.”

“We do not need to be in a hurry to adjust our policy stance, and we are well positioned to wait for greater clarity,” he said in an opening statement before a press conference that followed the rates decision.

A “wait-and-see” approach was enough to relieve troubled risk assets, with Bitcoin joining US stocks in surging and finishing the day higher. The S&P 500 ended up by around 1% for the March 20 session, adding $500 billion in market cap.

Reacting, Arthur Hayes, former CEO of crypto exchange BitMEX, suggested that the Fed had delivered a key signal for traders to add risk.

“JAYPOW delivered, QT basically over Apr 1. The next thing we need to get bulled up for realz is either SLR exemption and or a restart of QE,” he wrote in a characteristic X post, referring to officials rotating from quantitative tightening to quantitative easing.

“Was $BTC $77k the bottom, prob. But stonks prob have more pain left to fully convert Jay to team Trump so stay nimble and cashed up.”

S&P 500 1-day chart. Source: Cointelegraph/TradingView

Bitcoin traders eye US crypto announcement

Bitcoin traders nonetheless cared more about a potential change in US crypto posturing as whispers suggested that an announcement could come on March 21.

“This would be his first major update since March 6th, when the national crypto reserve was established,” trading resource The Kobeissi Letter summarized in an X post on the topic.

“Rumors state President Trump may be making a significant change to his strategy.”

When Trump signed an executive order to create a Strategic Bitcoin Reserve earlier this month, markets stayed surprisingly cool as it emerged that the plan would not necessarily involve the US buying BTC.

However, with the latest daily close above key resistance trend lines, cause for optimism was quickly returning.

“Bitcoin only needs to rally an additional +8% to position itself for a reclaim of the Range above and end this downside deviation,” popular trader and analyst Rekt Capital reported.

“Is that a lot, considering BTC is up almost +13% since last week's lows?”

BTC/USD 1-week chart. Source: Rekt Capital/X

Source: CryptoSlate

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Michelle

Economic

Forex

Central Bank

In focus today

Today we receive rate decisions from the Bank of England (BoE), the Swiss National Bank (SNB) and the Riksbank.

We expect the BoE will keep the Bank Rate unchanged at 4.50% in line with consensus and market pricing. Additionally, we anticipate the BoE will stick to its previous guidance noting that “a gradual approach to removing monetary policy restraint remains appropriate”.

For the SNB, we expect they will cut the policy rate by 25bp to 0.25% as inflation pressures remain muted, hovering in the lower end of the target range. Markets also favour a cut, pricing in roughly 20bp for the meeting.

We think the Riksbank will stay on hold at 2.25% and present a completely flat rate path, which is widely expected. However, we believe the risk is more likely to lean towards a dovish surprise rather than a hawkish one, considering that market pricing is slightly inclined towards the next move being a rate hike.

Norges Bank will release the Regional Survey today. We will keep an eye on the growth prospects for both Q1 and Q2. Based on leading indicators, we expect the expectations to be around 0.3-0.4% q/q, which should be well in line with Norges Bank’s forecast from the December MPR. But we will put more emphasis on the capacity metrics this time around, as they are paramount for the inflation and hence rate outlook in the medium turn. This could prove decisive ahead of the monetary policy meeting next week after the latest inflation numbers.

Economic and market news

What happened overnight

In China, the People’s Bank of China kept Loan Prime Rate 1Y and 5Y steady at 3.10% and 3.60% respectively. This was widely anticipated by markets and the market reaction was muted. Economic data on the Chinese economy at the start of the year was a mixed bag.

What happened yesterday

In the US, the FOMC meeting in the evening concluded with an unchanged rate decision from the Fed as widely expected. Powell sent a message as balanced as it could be. Not downplaying any downside risks but also emphasising that the Fed is not in a hurry to move. Markets reacted with lower rates, weaker USD and stronger equities. We maintain our call for the next cut in June, and a total of three cuts this year. Read more in our Fed review: Cautious stability, 19 March.

In Ukraine, the call between President Zelenskiy and President Trump was spent aligning both Russia and Ukraine in terms of their requests. We see the latest developments, namely the outcome from the Zelenskyi-Trump call yesterday, as positive for Ukraine, and for the broader long-term security in Europe. The White House is now saying their focus has shifted from the minerals deal to discussing the long-term peace deal. The limited ceasefire now seems possible in our view, but the road to a sustainable peace is still a long and rocky one, not least because there is no consensus on any credible security guarantees for Ukraine.

Equities: Global equities ended higher yesterday, with the US leading advances, closing near the day’s high and interpreting the Fed’s message rather positively. With the VIX ticking lower, cyclicals outperforming alongside small caps, and positive stories surrounding the MAG 7, we are likely seeing more US retail investors engaging in the buy-the-dip strategy.

In Europe, there was a slight “sell the fact” movement, with Germany lagging behind after its stellar performance, where the DAX is up 17% year-to-date. In the US yesterday: Dow +0.9%, S&P 500 +1.1%, Nasdaq +1.4%, Russell 2000 +1.6%.

Asian markets are split this morning, with both China and Japan being lower, while most other markets are higher.

European futures are unchanged (DAX slightly lower), while US futures are higher, led by the tech sector, not least due to the ambitious investment stories circulating around Nvidia.

FI&FX: This week’s bunch of central bank decisions kicked off with the BoJ and the Fed yesterday – both held interest rates unchanged. USD/JPY did not move on the BoJ decision but fell below 149 after US interest rates dropped in response to the slight dovish signals from the Fed. EUR/USD was steady around the 1.09 level. EUR/SEK rose above the 11.00 level again ahead of the Riksbank rate decision today.

Source: ACTIONFOREX

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Glendon

Cryptocurrency

According to a recent update by SoSovalue as of March 18, the daily total net inflow reached $209.12 million, while the cumulative total net inflow stood at $35.79 billion. The total value traded amounted to $2.12 billion, and total net assets were recorded at $91.97 billion, representing 5.65% of Bitcoin’s market capitalization.

BlackRock’s IBIT ETF Leads with $218M Inflow

The IBIT ETF on NASDAQ, sponsored by BlackRock, had a one-day net inflow of $218.12 million, with cumulative inflows of $39.50 billion. Its net assets reached $46.79 billion, representing a 2.87% share of Bitcoin’s market cap. The ETF’s market price stood at $48.61, with a daily increase of 3.85%. Fidelity’s FBTC ETF, listed on CBOE, reported no new net inflows, maintaining cumulative inflows of $11.37 billion.

Grayscale’s GBTC ETF, listed on NYSE, also recorded no new inflows, keeping cumulative net inflows at negative $22.50 billion. Its net assets were valued at $15.95 billion, with a market price of $67.59, reflecting a 3.86% daily gain.

ARKB, listed on CBOE and sponsored by Ark Invest, experienced a one-day net outflow of $9 million. Its cumulative net inflow stood at $2.67 billion, with net assets of $3.97 billion. The ETF’s market price reached $85.27, posting a 3.82% daily gain.

Grayscale, Bitwise, VanEck, and Valkyrie ETFs Hold Steady

Grayscale’s BTC ETF on NYSE recorded no inflows, maintaining cumulative inflows at $1.11 billion. Its net assets stood at $3.33 billion, with a market price of $37.89 and a 4.01% daily increase. Bitwise’s BITB ETF showed no inflows, keeping cumulative inflows at $2.03 billion. Net assets stood at $3.15 billion, with a market price of $46.55 and a 3.91% increase.

VanEck’s HODL ETF on CBOE had no new inflows, holding cumulative inflows at $832.40 million. Its net assets reached $1.15 billion, with a market price of $24.18 and a 3.78% increase. Valkyrie’s BRRR ETF on NASDAQ had no inflows, maintaining cumulative inflows at $314.30 million. Its net assets were $497.46 million, with a market price of $24.17 and a 3.87% daily gain.

Source: CryptoSlate

Risk Warnings and Disclaimers

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FastBull Featured

Daily News

[Quick Facts]

1. Tariffs create economic uncertainty, prompt layoffs at major US financial institutions.

2. Ukrainian and US teams to continue coordinating "steps toward peace" in Saudi Arabia.

3. Trump to order a plan to shut down the US Education Department.

4. Ueda Kazuo: Inflation faces upside risks, caution is needed.

5. Fed keeps rates unchanged, still expects two cuts this year.

6. Powell: Tariffs impact inflation, recession risks rise.

7. Israeli forces resume ground operations in Gaza, Hamas calls for international pressure.

8. Timiraos: Powell's less aggressive stance on tariffs excites markets.

[News Details]

Tariffs Create Economic Uncertainty, Prompt Layoffs at Major US Financial Institutions

Major US financial institutions are preparing for economic uncertainty caused by tariffs. Despite initial optimism after the November presidential election, the US government's tariff policies have dampened hopes of a market recovery.

Several large US financial institutions have announced layoffs. Morgan Stanley sets to cut 2,000 jobs by the end of the month, representing 2-3% of its workforce. JPMorgan starts the first round of layoffs in February, affecting nearly 1,000 employees, with more rounds expected this year. Goldman Sachs accelerated performance reviews, anticipating a 3-5% reduction, impacting around 1,400 employees. BlackRock announced a 1% workforce reduction in January, while Bank of America's investment banking division has cut 150 junior positions.

Ukrainian and US teams to continue coordinating "steps toward peace" in Saudi Arabia

Ukrainian President Volodymyr Zelenskyy stated on social media on the 19th that he had a "positive, substantive, and candid" conversation with US President Donald Trump. Both sides agreed that Ukraine and the US should continue working together to achieve a true end to the war and lasting peace. Their teams will meet in Saudi Arabia to coordinate further steps toward peace. Zelenskyy mentioned that Trump shared details of his call with Russian President Vladimir Putin. Ukraine has accepted the US proposal to halt attacks on energy and civilian infrastructure and agreed to an unconditional ceasefire on the frontlines.

These steps are seen as essential for preparing a "comprehensive peace agreement" during the ceasefire. The two leaders also discussed the frontline situation and the release of prisoners. Zelenskyy emphasized Ukraine's desire for peace and the importance of "peace through strength."

Trump to order a plan to shut down the US Education Department

On March 19 local time, President Donald Trump plans to sign an executive order Thursday calling for the shutdown of the U.S. Education Department, according to a White House official. As reported by USA Today, Trump is expected to sign the order at a White House ceremony attended by several Republican governors and state education commissioners. The executive order summary indicates that Trump will direct Education Secretary Linda McMahon to take "all necessary steps" to facilitate the closure of the Department of Education and return education authority to the states.

Ueda Kazuo: Inflation faces upside risks, caution is needed

The Bank of Japan (BOJ) kept its key policy rate unchanged at 0.5% on Wednesday. At a press conference, Governor Ueda Kazuo stated that this year's wage negotiations show wage increases not only at large companies but also at smaller firms, with wage growth expanding broadly. This aligns with the BOJ's January forecasts.

Ueda noted that tariffs could directly impact the economy and inflation, as well as affect sentiment and confidence through market volatility. While some effects may take time to materialize, others, like changes in public sentiment, could be immediate. The BOJ will ensure it does not fall behind in addressing inflation risks.

Japan's wage and inflation trends are on track, possibly stronger than expected. However, uncertainties in the US and global outlook make it difficult to assess potential impacts. The BOJ will review upcoming data in early April to reconsider its forecasts. The pace of future rate hikes will depend on incoming data.

Fed keeps rates unchanged, still expects two cuts this year

On March 19th, local time, the Federal Reserve kept interest rates unchanged on Wednesday in its latest policy meeting, maintaining the benchmark rate in a target range of 4-1/4 to 4-1/2 percent, in line with expectations. According to the monetary statement, recent indicators suggest a stable expansion in economic activity. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated. However, economic uncertainty has increased.

In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. Beginning in April, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25 billion to $5 billion.

The latest Summary of Economic Projections (SEP) shows the median federal funds rate at 3.9% by year-end, unchanged from previous forecasts, suggesting two rate cuts this year. However, there is significant divergence among committee members, with a more hawkish tilt compared to December's projections.

The Fed revised its GDP growth forecasts for 2025 to 1.7% (from 2.1%), 2026 to 1.8% (from 2.0%), and 2027 to 1.8% (from 1.9%).

It also raised its PCE inflation forecasts for 2025 to 2.7% (from 2.5%) and 2026 to 2.2% (from 2.1%), while keeping 2027 at 2.0%.

Unemployment rate forecasts stayed at 4.4% for 2025 (from 4.3%) and remained unchanged at 4.3% for 2026 and 2027.

Compared to the January 2025 statement, this statement maintains its assessment of current economic activity, unemployment, labor market conditions, and inflation but changes the description of the economic outlook from "uncertain" to " uncertainty around the economic outlook has increased" It also removes the phrase "the balance of risks" indicating heightened concerns about economic uncertainty. One member, Fed Governor Waller, dissented, supporting unchanged rates but opposing the slower pace of balance sheet shrinkage.

Powell: Tariffs impact inflation, recession risks rise

At the press conference, Chair Jerome Powell stated that tariffs and other policies have introduced significant uncertainty to US inflation and economic outlook. The Fed chose to remain unchanged and maintain high monetary policy flexibility.

The US economy remains robust, with "hard data" like employment and consumption showing strength, though some survey-based expectations have weakened. The probability of a recession has increased but remains low.

Powell noted that it is difficult to assess the specific contribution of tariffs to inflation but emphasized that long-term inflation expectations remain stable. While some inflation is attributable to tariffs, quantifying its impact is challenging. Goods inflation rose significantly in the first two months of 2025, closely tied to tariff implementation, but the exact extent is hard to measure.

Short-term inflation expectations rose, partly due to tariffs, with businesses, households, and market participants citing their impact. The Fed will closely monitor all inflation expectation data and not ignore any signs of changes in long- or medium-term inflation expectations.

Israeli forces resume ground operations in Gaza, Hamas calls for international pressure

In response to Israel's resumption of ground operations in Gaza, Hamas issued a statement on the evening of the 19th, calling on Arab and Islamic countries to use all means to pressure Israel and urging mediators to continue their efforts. The statement also held the US directly responsible for providing Israel with weapons used in what it called "genocide" in Gaza.

Timiraos: Powell's less aggressive stance on tariffs excites markets

In a recent article, Nick Timiraos noted that the Trump administration's policies made predicting economic growth and inflation more difficult. Deregulation and lower energy prices could boost growth while cooling inflation. Recent economic data was mixed, with spending slowing but hiring remaining stable. The February unemployment rate was 4.1%, and while most months last year saw declines in goods prices (excluding food and energy), recent increases contributed to inflation.

The combination of stagnant growth and rising prices (stagflation) could make it harder for the Fed to cut rates this year to prevent an economic slowdown. The Fed's response will largely depend on whether businesses and consumers expect prices to continue rising, as these expectations could become self-fulfilling. If workers, landlords, and business owners expect inflation to remain high, they will make financial decisions in ways that sustain higher prices. Surveys measuring consumer inflation expectations show increased uncertainty about the near-term inflation outlook.

In recent weeks, consumer confidence plummeted amid headlines of federal spending cuts and tariff hikes. At Wednesday's press conference, Chair Powell said, "Now is a good time to wait for greater clarity." Powell's less aggressive stance on potential tariff-related price increases has excited investors.

[Today's Focus]

UTC+8 15:00 Germany February PPI MoM

UTC+8 15:00 UK January ILO unemployment rate

UTC+8 16:00 ECB President Christine Lagarde speaks

UTC+8 16:30 Swiss National Bank March rate decision

UTC+8 17:00 Swiss National Bank President Thomas Jordan holds press conference

UTC+8 20:00 Bank of England March rate decision

UTC+8 20:00 ECB Chief Economist Lane speaks

UTC+8 21:00 ECB Governing Council Member and Bank of France Governor François Villeroy de Galhau speaks

UTC+8 22:00 US February Existing Home Sales (annual rate)

Risk Warnings and Disclaimers

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Thomas

Central Bank

The Bank of England is widely expected to hold interest rates when it meets on Thursday, as the U.K. faces economic headwinds both at home and abroad.

The central bank is highly likely to keep its benchmark interest rate at 4.5% at its March meeting, given the unpredictability of President Donald Trump’s trade tariffs and a fledgling global trade war, and how those factors could affect inflation in the U.K.

The BOE is also convening as the U.K economy shows signs of stalling, with monthly growth data showing anemic output. Thursday’s meeting comes just days before U.K. government taxation changes come into force that have proven unpopular with businesses, which say their rising tax burden could dent growth, investment and jobs.

For its part, the Bank of England already warned at its last meeting in February that it would tread carefully, as it downgraded the U.K.’s growth forecast for 2025 and predicted a temporary rise in the rate of inflation to 3.7% — above the bank’s target of 2% — which BOE policymakers said would be caused by higher energy prices.

As for Trump’s tariffs, Bank of England Governor Andrew Bailey warned earlier in March that potential trade duties were another threat to the country’s economy, and growth, telling British lawmakers that “the risks to the U.K. economy, and indeed the world economy, are substantial” and that U.K. citizens would have less money “in their pockets” as a result of tariffs.

Dissent in the committee

In February, a majority of seven members out of the nine-strong monetary policy committee voted in favor of a cut, with two of the MPC’s members, including well-known “hawk” Catherine Mann, voting for a larger trim.

Economists say the voting split of Thursday will be closely watched.

“There are visible signs of disagreement at the Bank of England on the pace of rate cuts required this year. But with wage growth and inflation remaining sticky, we expect the Bank to keep rates on hold this Thursday, ahead of the next rate cut in May,” James Smith, developed markets economist at ING, said in a note Monday.

“Drama is not often synonymous with the Bank of England. But February’s meeting was nothing short of a bombshell. [BOE committee member] Catherine Mann, who for months had led the opposition to rate cuts, surprised everyone with her vote for a 50 basis point rate cut. And that posed the question: if the arch-hawk is prepared to vote for faster rate cuts, will the rest of the committee soon follow suit?,” Smith questioned.

“For all the excitement, the answer seems to be no. Most officials that have spoken since have struck a much more cautious tone,” he noted, with ING predicting three more rate cuts will take place this year. It nevertheless conceded that inflationary pressures are putting the central bank in an “uncomfortable position.”

Budget changes?

The BoE is meeting days before the U.K. Treasury’s “Spring Statement” on March 26, when British Chancellor Rachel Reeves presents an update on her plans for the British economy.

The finance minister is coming under pressure to cut public spending, raise taxes further or to bend the government’s self-imposed fiscal rules amid higher borrowing costs, with the yield on U.K. debt picking up in recent months. The treasury has mooted the idea of cutting spending on welfare payments, but the idea remains controversial among lawmakers in the center-left Labour government.

Reeves’ ‘Spring Statement’ will be announced alongside economic forecasts from the Office for Budget Responsibility, the U.K.’s independent economic and fiscal forecaster, which gives its assessment on the likely impact of the government’s taxation and spending plans that were announced last fall.

That budget included £40 billion ($51.9 billion) worth of tax rises — with the burden falling mainly on businesses — to plug a black hole in the public finances and allow for investment in public services.

The OBR is widely expected to downgrade its U.K. economic forecasts, putting further pressure on Reeves to amend her policy plans.

“It was not supposed to be like this. U.K. chancellor Rachel Reeves planned to present the government’s official biannual forecast on 26 March without making any changes to policy. However, a rise in market interest rates, high borrowing in fiscal year 2024-25, and a possible downgrade to the Office for Budget Responsibility’s productivity growth assumption have conspired against her,” Andrew Wishart, senior U.K. economist at Berenberg Bank, said in analysis Monday.

“Without spending cuts or tax rises, the OBR would forecast the government missing its fiscal rule of funding day-to-day spending entirely with tax revenue by 2029-30. To avoid six months of speculation about how Reeves will make up the shortfall in the next fully-fledged budget in the autumn, the chancellor must act now,” he added.

Source:CNBC

Risk Warnings and Disclaimers

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Owen Li

Political

A two-thirds majority of Bundestag parliamentarians, required for the change, approved the vote on Tuesday.

The law will exempt spending on defence and security from Germany's strict debt rules, and create a €500bn ($547bn; £420bn) infrastructure fund.

This vote is a historic move for traditionally debt-shy Germany, and could be hugely significant for Europe, as Russia's full-scale invasion of Ukraine grinds on, and after US President Donald Trump signalled an uncertain commitment to Nato and Europe's defence.

However, state government representatives in the upper house, the Bundesrat, still need to approve the moves - also by a two-thirds majority - before they officially become law. That vote is set for Friday.

Friedrich Merz, the man behind these plans and who is expected to soon be confirmed as Germany's new chancellor, told the lower house during Tuesday's debate that the country had "felt a false sense of security" for the past decade.

"The decision we are taking today... can be nothing less than the first major step towards a new European defence community," he said, adding that it includes countries that are "not members of the European Union".

EU Commission President Ursula von der Leyen called the vote "excellent news".

Speaking at a press conference with Danish Prime Minister Mette Frederiksen, she said the vote "sends a very clear message to Europe that Germany is determined to invest massively in defence".

Frederiksen meanwhile called it "fantastic news for all Europeans".

Germany has long been cautious about defence spending, not just for historical reasons dating back to 1945, but also due to the global debt crisis of 2009.

But despite fears the vote would be tight, lawmakers in the end voted in favour of the changes by 513 to 207 - comfortably over the two-thirds majority required.

One leading German newspaper described this vote as "A day of destiny for our nation".

Under the measure, any spending on defence that amounts to more than 1% of Germany's GDP would no longer be subject to a limit on borrowing. Until now, this debt brake has been fixed at 0.35% of GDP.

The change could transform the country's partially neglected armed forces in an era of great uncertainty for Europe.

And this vote was not just about defence. It was also about freeing up €500bn for German infrastructure - fixing things like bridges and roads, but also to pay for climate change measures, something the Green Party insisted on.

Merz, whose CDU party won Germany's general election last month, proposed the measures swiftly after the win.

In an interview on Sunday he specifically mentioned fears that the US could pull back from defending Europe and Trump's talks with Russian President Vladimir Putin, saying that the "situation has worsened in recent weeks".

"That is why we have to act fast," Merz told public broadcaster ARD.

It is a significant political win for Merz, who will, when he takes power as chancellor, now have access to hundreds of billions of euros to invest in the state - what some in Germany have called a "fiscal bazooka".

It is also an important moment for Ukraine. The defence plans approved today by the Bundestag also allow spending on aid for states "attacked in violation of international law" to be exempt from the debt brake.

That will enable outgoing Chancellor Olaf Scholz to release €3bn in aid to Ukraine as early as next week.

Merz chose to push the changes through the old parliament, knowing the vote arithmetic was more favourable now than it would be after 25 March, when the new parliament session begins.

The far-right AFD and far-left Linke, which both performed well in February's election, oppose Merz's plans.

Merz has still not agreed a coalition deal to govern Germany after his election win, and has announced ambitious plans to have a government in place by Easter.

Coalition negotiations in Germany, however, can drag on for months at a time.

Source:BBC

Risk Warnings and Disclaimers

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Justin

Central Bank

The Fed, starting with today’s policy announcement at 2:00pm eastern, is “facing the most difficult challenge a central bank ever faces when the shock is both pushing up prices, in terms of imports, and reducing jobs, in terms of input costs. This is what tariffs do,” wrote former Treasury Sec. Larry Summers on Tuesday.

What to do when the stakes and uncertainty are high? Nothing sounds about right, at least for now. “The costs of being cautious are very, very low,” Fed Chairman Powell said earlier this month. “The economy’s fine, it doesn’t need us to do anything, really.”

Fed funds futures agree, and are pricing in a near certainty that the central bank will leave its 4.25%-to-4.50% target range unchanged today. The confidence for standing pat is moderately lower at an implied 80%-plus probability for the next FOMC meeting on May 7. A key question is whether today’s revised Fed economic projections, and Powell’s press conference, will change the calculus?

The policy-sensitive US 2-year Treasury yield has recently started pricing in higher odds for rate cuts by dropping below the median Fed funds target range–again. Earlier in the year, the 2-year was more or less trading in line with the median Fed funds rate, which suggested the market expected a steady policy. But in recent weeks the crowd revised its guesstimates and has turned dovish on the outlook.

A Fed Rate Cut May Be Near, But Not Today_1

At the core of the Fed’s current dilemma is deciding if the risk of higher inflation dominates the threat of slower economic growth. Inflation was already sticky before tariffs, and the odds have likely increased that pricing pressure will remain firm if not accelerate if a global trade war unfolds.

But trade-war risk is also a factor that could slow the economy. As reported yesterday by CapitalSpectator.com, the US first-quarter median nowcast for GDP growth has fallen recently and is currently a weak 1.2% — close to a stall-speed pace.

By some accounts, looking beyond the first quarter is ringing alarm bells. Clement Bohr, an economist at UCLA Anderson Forecast, writes that if the tariff plans are fully implemented, a recession is likely:

“As 2025 begins to unfold, there are no signs of an imminent recession… However, the stated aim of the Trump Administration is to dramatically transform the U.S. economy in its first 100 days and that begs the question: if fully or nearly fully enacted, could these initiatives cause enough sectors of the economy to contract at the same time and trigger a recession? The answer appears to be yes, that a downturn could result over the coming year or two, and that we should now be on a Recession Watch.”

The burning question is where the Fed comes down on weighing the expected risks for inflation vs. recession? Doing nothing and waiting for more clarity via incoming data may be prudent today, but this will likely be the last time in the foreseeable future that the central bank can walk a tightrope and try to redirect the market’s attention to some point in the future.